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What is the best way to close this type of basement in for living space

I have a basement, that has had some work done to it before by the previous owner due to water infiltrations issues. Two sides of the 4 walls have the interior weeping tile/drainage system that leads outside, and has this white barrier installed about half way up.

One side of the basement which has a door and lets out to the backyard has standard studding and fiberglass insulation.

The last side of the basement is the standard concrete pour. Not sealed, not painted, not insulated, nor anything, just bare.

See Attached Picture

What is the best way to enclose this space (with insulation) such that it could be living space one day.

I was going to use the XPS foam board to attach it to the concrete, but not sure if that is the best for the normally wood stud wall since if it gets wet, it needs to be able to dry inwards. Unless what I can find is mistaken. Would it be bad to enclose and insulate it using different techniques ?

Any help is appreciated.

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