I think he may be talking about the rim joist area. Chpwaman, do you mean the space above the wall (all around the perimeter of the basement)? If so, any/all air gaps first get sealed with caulk or foam, then add insulation. Getting a professional to spray foam up there is a good way to go. Sometimes folks put fiberglass insulation there, but I've heard that fiberglass can retain moisture (not a good thing for that area), so foam is better. (I used solid foam pieces for our basement, cut to fit, then sealed edges with spray foam - trouble with that is that you have to hold those spray cans upside-down, and it's very difficult in that area (no room to maneuver the cans).

First, try to ascertain where the water table is. Just because you're on a hill doesn't mean the water table isn't high. If the water table rises above your footings at any point, an interior system might be indicated. That's because water could be coming up through the slab or at the joint where the wall meets the poured footing. If the water table isn't that high, the only sure cure would involve excavating all around and using one or more of a number of different waterproofing products. These include spray-on membranes, bentonite, plastic bubble membranes, peel and stick and crystalline products. If there's a surface water problem, yes, swales might be helpful. But before that, look closer to home. Are your eavestroughs clean and functioning? Where do the downspouts exit? They should be sending water at least 10 feet away from the foundation. Is there a good slope down from the foundation to surrounding soil. I've seen many homes that sit in a depression--either because the original builder put the first floor too close to grade, or subsequent owners altered the grading. Not to mention the gardening types who load up on thirsty plants next to the foundation and water away like crazy. Next time it rains, go outside and check what's happening. ******* Mildew grows on my shoes in the closets upstairs, and my clothes have a musty odor. This is a separate problem and very likely the result of inadequate insulation on the closet walls. So moisture condenses inside--or even on--the interior walls during the winter. You can usually solve this problem by keeping the closet doors open during winter or providing an additional continuous source of heat. It's a reason to avoid placing closets on outside walls of a home, and especially corners where three and four stud framing cuts the R levels drastically. This post was edited by worthy on Sun, Mar 17, 13 at 16:49

Get a dehumidifier. Here's the problem with what was said: Air that can hold more moisture is a good, not a bad, thing because you are talking about relative humidity -- the amount of moisture in the air relative to what it can hold at its temperature: So, by doing nothing other than warming air, you can lower its relative humidity. If you were to put a heater in your basement and warm it from, say, 65 degrees to 75 degrees, you would drop the relative humidity of the basement because, even though the air has the same absolute quantity of moisture in it, the 75 degree air could hold more than the 65 degree air, so the relative humidity is less. But a dehumidifier is even better than a heater because it removes moisture in two ways -- it drops the air to a temperature below its dewpoint, removing actual moisture, and then warms the air, lower the relative humidity further. An air conditioner is a problem for at least two reasons. First, because it cools as it dehumidifies, its ability to dehumidify is limited to situations where cooling is needed. If it's below 70 degrees or so outside, the a/c evaporator is liable to freeze, and at that point it'll keep running but do nothing as far as cooling or dehumidifying until it's shut off and the evaporator is allowed to thaw out. Second, because the a/c lowers the temperature of the air, it makes condensation on those walls and other surfaces more, not less, likely. Why? Because if the surface of a wall is, say 64 degrees, and the air is 65 degrees at a high humidity level, it doesn't take much heat transfer for the wall to pull the air near it down just one degree (and if the humidity approaches 100 percent, that might be enough to create condensation). On the other hand, if the air is 75 degrees with the same absolute quantity of moisture it had at 65 degrees, the wall has to drop the air 11 degrees to create the same condensation. Obviously that's much less likely. And that's the benefit you'd get from a heater alone. With the dehumidifier, the air won't have the same absolute quantity of moisture at 75 as it had at 65 -- it'll have less. Finally, the walls won't stay 64 degrees once you warm the room up. They'll gradually warm up too, further reducing the risk of condensation.

Alisande, we have a damp basement, too, and, like you said it's a pain to empty it. We have to empty it about twice a day in the wet season. As you might imagine, we're really tired of doing this! We wish we had a floor drain to have it empty into, but we don't since it's an old house. What we're going to try to do--and maybe you can do this, too--is figure out how to get the dehumidifier drain into the laundry sink. In our case, we need to rig some sort of hose for it and figure out a way to raise the dehumidifier to the proper height. But maybe you don't have a sink in your basement... :( Even so, a dehumidifier is worth having. We got ours at Lowes for about $120 and it has been money very well spent. Our basement smells clean and nice, and the items we store down there don't get damp like they did before we were running the dehumidifier. Of course, a dehumidifier can't solve all moisture problems. It definitely sounds like your gutters/etc were causing the problems. You might want to take a look at some books on basement moisture problems. Right now, I have two books out of the library on this subject that are really helping us figure out how to make some simple fixes without calling in the professionals. Home Water and Moisture Problems: Prevention and Solutions by Gary Branson (this one is so good that I'm planning on buying it for friends and family for Christmas!) 5 Steps to a Dry Basement or Crawl Space by Ronald K. Gay I sure hope some of this info is useful. I know how annoying it is to have a wet basement. Good luck!