I'm not sure how you would use cellulose underneath a house - that's a blown in product (did you mean fiberglass batts instead?).

The quote on a 1920 house we own for spray foam was actually less than fiberglass but it may be due to the crawlspace being tight and insulators not wanting to be down there. In our situation we're going with spray foam. Which brings me to...

What kind of climate are you in? If you're in a hot/humid one, have you considered encapsulating the crawlspace?

foam. it will seal air leaks under 3" wide
(any larger will need to be manually sealed prior
to foam install) and insulate in one fell swoop.
3" should be install everywhere...ok to have more,
but not less.

where is the ductwork?
what is your climate?

best of luck

We are in Houston, so it's very hot, very humid. The quote for foam was for all the interior walls, but we were advised to consider additional insulation in crawl space which we had not thought of. Our other alternative is the cellulose in the walls.

Can you tell me what it means to encapsulate the crawlspace?

Also, someone told me that by doing a foam insulation, the house will not breathe and that will promote wood rot. True or False?

Thanks!!!

'encapsulate' see below.

http://www.bing.com/search?q=non+vented+crawl+space&qs=OS&pq=non+vented+crawlspace&sc=4-21&sp=1&FORM=QBLH&cvid=14c246cdde324b4ca874139653ac58e3

houses don't need to breathe..well with clean
filtered measured air we can add make up air
if necessary.build tight...ventilate right.
but you have to be 'tight' enough to need fresh
air first. it doesn't just happen.

in our hot humid climate, we put ductwork,
heating system & water heaters in the attic.
then we put holes in the sheetrock ceiling to the
living space below.
this vented attic allows hot humid air to circulate aroun
ductwork, which is minimally insulated at best R-8.
the holes in the attic floor/sheetrock ceiling of living
space below are covered by recessed light trims, bath fan
covers, while these holes aren't seen as holes...they often go unsealed.
humid hot attic air enters the living space via these holes
adding to high relative humidity (RH) in the living spaces.
the coolness of the air supplied by air handler unit in attic
is warmed up as it travels through hot attic air in attic..before this air ever gets into the house.

short of all trades actually sealing the holes they make..
and that in design stages your arch/designer actually
gave hvac install & performance a passing thought...
then ductwork would be located inside living space
in furdowns, trey ceilings etc.
then a design & sizing of ductwork would have been
done, along with a manual J to size the hvac system..
so that you don't get the bigger is better 500 sq ft per
ton "sizing".

so we know that probably wasn't done.
and we know that trades don't seal holes...they make
them.

foam insulating the roofline solves all these issues.
you either seal as you go...and size/design hvac system..
or you foam insulate the roofline.

you'll still need ducts mastic sealed, and all recessed lights
should still be Insulation Contact Air Tight (ICAT)..

but the ductwork will still be in a semi conditioned space.
which lets air leaving coil be closer to that temp than after traveling the lenght of the run loosing coolness every foot.
and those pesky holes ...not as big of an issue.

now that you've moved the air barrier & thermal barrier
from the attic floor to the roofline, the dymanics of the attic
change. instead of air barrier/sheetrock/attic floor allowing
the hot attic air to be sucked into the house..that air barrier has been moved. no insulation on attic floor to be sucked into house...because house isn't going to suck from the attic.
the thermal barrier has been moved also. so a huge portion
of the heat of the summer sun is absorbed at the roofline, rather than allowing the heat to collect in the attic..the temp in the attic is within 10 degrees of both outside (ambient)
and inside the living space. semi conditioned attic.

we use open cell...the amount of inches required to meet
code. not average fills..and no 'performs like' bs. full depth.

in crawlspaces...closed cell. 3".

using foam for walls...espically interior walls..which would be for sound dampening...not what I'd recommend.
instead foam sheathing boards on the exterior of walls.
conventional insulation & air tight drywall approach...
ADA..google it!

foam in walls has a long long payback, putting it first in the
attic @ roofline has short payback & comfort benefits.
putting it under floors will benefit you in winter time. less benefit for shorter time of year because of our long cooling season.

best of luck,

the house will not breathe

"...mammals and birds breathe to oxygenate their blood. Walls don’t have any blood that needs to be oxygenated, so they don’t need to breathe. Walls have different needs from people. Although walls don’t need to breathe, they do need to be able to dry out when they get wet. And a building’s residents need fresh air" Martin Holladay, Green Building Advisor *

Foam is permeable to moisture but unaffected by it, so moisture is not "trapped". If interior moisture is too high, you reduce it with fans and/or mechanical dehumidification and air conditioning, not leaky insulation and sloppy construction.