Please post a picture

Those vents into living area do look wrong but if you removed the sheathing under the cantilever and insulated with spray foam it would give you an air seal so it wouldn't matter. If using batt insulation you should have an airtight sheathing instead of your vented one.

I would open it from the outside. There may be blocking that prevents you from reaching the full cantilever if you open it from the basement. Spray foam probably the better choice over batt insulation. You get air sealing and higher R-value with spray foam.

I wonder if it can even be gotten to, from the basement. That is well out from the basement foundation wall. I am thinking, the only way would be from the outside, and once its all sprayed, I would put something other than that vented soffit material on the exterior .

This a good detail by Green Building Advisor, one of about 4 online reference sites you can count on. The vertical 2x wood block between joists, in line with the wall below, should be there, it is needed structurally. GBA link.

I opened the bottom up..this is what I found. What's the solution?? The cavity goes all the way into my home. Just put new insulation in and close it back up?

Definitely needs new insulation. You may want to talk to an insulation company and see what they say. They may recommend that you have blown insulation or foam sprayed in there. They may also tell you if there is a reason for the vented bottom.

Just like the picture 3onthetree posted is what you should do.

A little about insulation, It's not the actual material that insulates but the air trapped inside that does the job. If air is allowed in infiltrate and blow through fiberglass insulation the R value is drastically reduced and you'll still have cold floors. It's not just stuffing fiberglass insulation in and calling it a day, the cavities under the floor need to be air tight and where the foam panels come in requiring a little time to install them.

Apply Foam insulation on all four sides of each cavity. Start in the back slightly beyond the basement wall with a fitted piece of foam board and caulk all around it. Next do the same on the opposite vertical side covering the rim joist and caulk to seal it. Then do the very same thing on the top under the floor and caulk to seal it. Now stuff it with fiberglass insulation and finally cut and fit a piece of foam board on the bottom.

You can use caulk in a tube or cans of great stuff foam to seal the foam board the the object is to create a dead air space without outside air infiltration. It doesn't need to be the 1 1/2" thick foam board shown in the picture, and I actually recommend 3/4" or 1" foam board because it's easier to cut and work with to get it tight into the cavities without a hassle. If you want it thicker just double layer it. There may be nails coming through the floor so just push the foam right into them, no need to try and remove them. Good luck.