If you're using fg in a void it is imperative to fill the entire area with fg. Otherwise, you are setting up convection currents in the void, which will render the fg much less effective. Even installed correctly, fg insulation is leakier than other common insulating materials. (Scroll down to page 10 in the link.)
For the section that is below grade, forget the fg altogether and use extruded polystyrene (XPS) or expanded polystyrene (EPS) boards and no separate vapour barrier.

Thanks worthy, your comments on convection currents is exactly what I needed to hear...something I had forgotten about. However, in order to run electrical receptacles at the proper height on that wall, I have to build a stud wall in front of the block below grade. I think it would be easier and cheaper to do moisture barrier, followed by batts (roxul rock wool, not fg) and vapour barrier, than it would be to put 3+ inches of XPS or EPS in this part of the wall.
That is unless you or someone else can suggest another strategy?

This is why you don't put fg in the basement.*



See page 7 of BSD-103.

*The exception is behind a permeability variable barrier, the only one at this time being MemBrain.

You'll have the same problem using anything other than non-solid insulation materials. In other words, with the one exception of MemBrain, stick to foam boards or sprayed foam. However, you can put fg etc. in the wall as long as there is at least 1" (or equivalent) of XPS attached to the inside foundation wall.

Thanks again,
But if I may, I would like a little more clarification on this.
First of all, although I realize all basements are going to have some moisture issues, relatively speaking, I have a very dry basement. So, from your last statement, if I attached 1" of XPS to the lower half of the wall (the cement block part) and built my new stud wall on top of that, I could confidently fill the remaining gaps with batt insulation to the ceiling?
But, from what I've read in the building science articles, I should NOT put a vapour barrier on top of the insulation to allow for inward drying, unless it is MemBrain?
I have no problems with this, it just seems counterintuitive. What happens at the top half of the wall (wood stud) that is built on top of the block wall above grade? It is brick veneer on the exterior if that matters.

Above-grade, Building Science Corp. calls for only vapour retarders in a cold climate. However, this advice may clash with prescriptive building codes, so you may be required to install a vapour barrier.

I have had similar problems here, with some inspectors insisting on vapour barriers in the basement where there is XPS while another inspector allowed closed-cell sprayed polyurethane foam (ccSPF) to be installed sans an (unneeded) vapour barrier.

I know it's hard sometimes to keep up with the science on this!

Note, too, that the Building Science Digests etc. are constantly upgraded.