As has been mentioned in a previous post, I had to tear up part of the basement wall to see about the water that came a few weeks ago (I over-watered outside and it made it's way in somehow). I tested all sorts of things and it appears that water was draining down a hole in the soil by the front sidewalk. The dry heat this summer pulled the soil away from the concrete quite a ways. Anyhow, I filled the area in and earth-bermed it to prevent this from happening in the future.
That left putting things back in the basement. The bottom foot of plaster along that wall seems to have disintegrated over time. We never saw this because of the paneling that the prior owner had put up along that wall. So the first matter was to re-plaster that section. I used a product called Quikrete Quikwall which worked great. It's a portland cement product that includes some fiberglass in the mix. It's very durable, spreads fairly easily once mixed, and is waterproof too.
Once the plaster dried for a day or two, I re-framed the bottom half with 1" x 2"s. I had to use "Liquid Nails" caulk to keep some of it attached to the concrete basement floor. Another day or two to dry for that and the wall was ready for the next step.
Then I put some of the original foam back in place, cut some new foam sections for one or two areas that needed replacing (and in the window well which really had no extra insulation!), and finally cut the paneling to size and nailed it all in place (adding some more Liquid Nails along the 1x2s to make sure things held solidly in place).
Now it's all done and looks good again. We may eventually decide to re-do the entire basement but that is a long ways off if we do that as it would require a lot of tearing down to studs, etc. and rebuild from scratch!