OK, so DSS has a cheap fixer house that he's working on making livable. It's ancient (100 years old?) and had paneling glued to the walls that was coming loose. He pulled it off and found that the exterior bricks had been skim coated on the interior with plaster and the paneling was glued to the plaster. it's all crumbling.

So...how to put this back together properly? He wants to drywall it, so we're thinking fur it out and attach the drywall? Putting up full 2x4 walls will cut into the small space quite a bit.

Insulation? Moisture barrier?

This is a house that will never be worth much, due to its location, and DSS doesn't have a lot of spare cash. So we need an inexpensive "lesser of the evils" type solution that makes the house sturdy and livable, if not perfect.

Ideas are welcome.