Just clean it up and remove loose particles and paint as much as you can using a chisel and steel brush and after you did that, apply a masonry bonding agent prior to parging the wall with cement.

Sean, Home Depot has it or you can get it on Amazon, SikaLatex concrete bonding adhesive is one of them that you can use.

Good luck

What cement product do you recommend? We're attempting the same do it yourself in our basement.

If you have an old foundation that used lime mortar (usually pre-1900-1920ish) then use lime mortar to repoint and parge. No cement (portland). I just did the same thing on both the interior and exterior of my stone foundation. My interior was similar to the picture above.

If you get rid of the parching, you'll have a really lovely stone wall in your basement.

How do you know the differece between lime mortar and cement?

Kalypso, there's a few factors or characteristics which can help you tell the difference.

1. Age. Anecdotally, in the US if your house was built before 1900, mostly likely lime mortar. 1900-1920 (roughly), was somewhat a transitional period as portland cement became more widely available so it depends on the area of the country, rural vs city etc. This is a good starting point.

2. Lime failure. Lime mortar which is failing due to moisture will become powdery and leave behind sand. If it hasn't completely broken down yet, if you disturb failing lime mortar (by touching, scraping, poking etc.) it will turn powdery/sandy. This is a dead giveaway, this won't happen to cement.

3. Vinegar test. If you spray vinegar on lime mortar, in some cases the lime will react and fizz, this won't happen in any significant way with cement. In my experience, this method is only sure if you get a lot of fizz. Some types of cement are blended with lime and may produce some fizz.

4. Color. Very generally, lime leans toward a whitish color and cement leans towards gray. But lime mortar color can differ vastly based upon the color of sand and other materials that it was originally mixed with. Note that modern day lime and cement mortars can be colored almost any color.

5. Lime flecks. Some lime mortars will contain little white flecks which are pieces of lime that did not completely break up when the limestone (or oyster shells in some coastal areas) was slaked. But also note that whether the lime mortar contains these flecks and to what extent can differ from place to place because of the method, materials, skill of the person and purpose of the mortar.

6. Hardness. A chunk of lime mortar is distinctively softer than a chunk of cement. Cement chunks are hard as a rock. Obviously this probably isn't helpful if you are dealing with mortar between bricks. But if you are dealing with a fieldstone foundation, there will be chunks.

7. Laboratory testing. You can get lime mortar tested, but usually this is done when you have a historic restoration and you want to match the color and/or composition of the original lime mortar.

LimeWorks.us - Lime Building Materials for Historic Restoration

is a fantastic source of info ... highly recommend!!! With their detailed instructions I repointed repaired and re-parged my sandstone basement walls and applied mineral paint in white over it for additional protection. There are other sources of hydrated lime (ncl Frerk and Sons in Chicago) if lime mortar is all you need.