Clarification and picture to go along with question 2... the plan is to wall around the furnace. So depending on where exactly the wall is going to go, the ductwork is going to be going almost perpendicular or at an angle through the new wall. It'll be garage space on the other side of the wall so I'm guessing it'll have to be sealed up pretty well.

How do I handle the tiered cement block that is open on top? Do I need to cover it up or can I leave it open (if it'll be behind a framed wall)?

Assuming it rests solely on a poured footer, I would see no particular reason to fill it. Though I sure would have questions as to why the blocks above are offset unless there is another row of blocks underneath them or this is not a supporting wall.

I'm assuming it'll have to be sealed off pretty decently.

Caulk, foam and drywall. Be sure to add a CO detector to the basement.

Do I need to go the xps route over the block being that I'm in Atlanta or can I just do fiberglass?

Fibrous insulation behind polyvinyl is a problematic installation anywhere. Use XPS or EPS to meet the minimum IECC 2009, which has been adopted in Georgia.

I'm not clear where the furnace ends up in your reno. If it is being enclosed, provision must be made for an adequate air supply.

Here is a rough idea of the floor plan. The furnace and water heater will still be open to the garage so air supply will not be a problem.

Thanks for the info Worthy!

{{gwi:2132676}}