worthy -- thanks for replying... unfortunately, I can not slide in the XPS behind the studs. By local code, we had to install fire blocking on the end of the wall. So now it is closed off. And, I can't install XPS in between the studs becuase I already have electrical and piping running through the studs. The gap between the wall and the stud is only a little more than 1/2". So even if I could slide in the XPS behind the studs, I would only get about r 3 value.... Thats why I figured it is almost better to put no insulation. The pipes arent gonna freeze; Plus, if I do get moisture back there, then there will be no fiberglass insulation to get wet. With no insulation, the wall will just dry out. (with the help of my dehumidifers and the bathroom vent fan, of course) If I get a chance, I will post a picture tonight of the studded wall with the roughed-in plumbing and electrical. thanks again. mm I'll try to post a picture later....

I've often written about foam being better than batts. In a concrete basement below grade there will be no air pressure differential to cause air movement from the outside in. Batts are OK here. The bathroom is not going to be sealed from the rest of the house, so whether the batts are faced or not is not a big deal. That is my view. Others may be more precise about reasons for one or the other. Definitely do insulate. It's a more comfortable room afterwards. The temperature gradient is lessened. Batts are OK. Any kind of batt. If you want to do somthing better, you could use spray foam but that is a whole new learning curve. Batts are easy. Methinks a little knowledge can be a dangerous thing.

Foam against the wall, whether it's rigid or sprayed, is the the most effective system. Here's how Building Science Corp. advises doing an interior drain. Many drainage companies use this method. This way, interior insulation can be taken directly to the floor. Glued, but not nailed/screwed. For a basement with a system that requires a gap, the best you can do is try to prevent the damage of the convection loop with moisture resistant insulation at the top--rim joists and floor members. The convection loop problem was only fully realized in this century. Before then, in fact, it was often advised that half-height basement insulation was fine, as it was the above-grade portion of the basement wall that needed to be upgraded. It's hard to picture your situation in the abstract.

If the garage exterior is insulated, there's no need to insulate the rim. But any portion of the walls below-grade should be insulated to at least the same required R Value as the rest of your basement walls.