Finishing basement - need advice, exploring options
Let me start out by saying this project is in the very early planning stages, so any advice about things to avoid, definitely not do, or are against code is appreciated and welcome, but please no yelling, nobody is in imminent danger at this point.
We need to do some serious replacement work in our finished basement. It was finished when we bought the house and we have not done anything else to it. it is dry, with a sump pump, and we use a dehumidifier. The carpeting needs to go, we had a sump pump failure several years back that caused just enough water in the basement to soak the carpet. We had it dry pretty quick, but I am suspicious of it. We also had a air conditioner issue that soaked a small area for a while before we found it. Since the mini flood, the yard has been properly graded and the sump pump gets significantly less water when it rains. I do not expect this to happen again as we also now have a generator for power outages.
On top of that, I currently have one 4 foot section of wall open due to significant mold due to a leaking outside faucet. It didnt spread much past the wet area (the 4 feet included all the mold plus clean edges), so I don't think it's a larger mold issue, but there is a residual light ring just above the bottom frame stud that I believe goes all the way around due to wicking from the one mini flood mentioned above.
And the walls are full of that cotton candy type of insulation, which, from my understanding, is not a good choice for below grade walls.
---So here's what I need help with---
I know this basement cannot be counted as living area because there is no egress window. We also are not in a position to install one any time soon. So I had a difficult time getting answers about permits as they got hung up on the lack of egress window, ignoring the fact that the room is already finished and I need to replace what is there. I am also NOT trying to get is classified as living area.
The way I see it, I have three options
1) remove everything and leave it completely unfinished. I don't even want to consider this as the walls should be insulated. It would be a shame if this ends up being the only option
2) remove everything and replace with rigid insulation and suitable floor. I like this option, but not sure how to do it right.
3) remove everything and go for completely finished basement with egress window to get permits. Not a fan of this either as we would not be able to accomplish this for a number of years, and I need to replace the floor now as well as do something with the opening I have.
Can anyone suggest how to go about properly working on a space that I'm not claiming as livable space? I absolutely want to persue permits when the time comes if that is appropriate, but not as living space (so no egress window).
If I'm able to move forward with redoing the walls and floor, any advice? I am intrigued by the Thermex that doesn't need drywall over it, but can that be paneled over to cover the shiney covering? Is it better to just reframe it all and use other sheets plus drywall?
If it matters, this area is not used as a regular hang out space. It is mostly storage, laundry area, and houses our air hocky and pinball tables. It's about 800 sf if I had to guess, divided into a utility area, laundry area, and two smallish rooms.
Any and all comments and advice are welcome and appreciated. I need to gather enough information to start figuring out what this will really entail before I can decide how to go about getting it done and when we could take it on.