I'd put the foam sheathing on the exterior walls.
seal all seams & holes prior to cladding.

conventional insulation in walls.

air tight drywall to interior.

sole plates caulked to slab or sill seal under
sole plates.

foam on exterior will eliminate thermal
bridging of wall studs and add R-7 to wall
insulation. use extruded polystyrene only.
expanded degrades quickly when left uncovered
to elements.

best of luck.

The pic below illustrates how I insulate when given the choice. If taking the XPS route, use shiplap boards or tape at joints. Depending on local Code requirements and climate, you can forgo sheathing under the XPS. For extra water protection, I install housewrap on top of the XPS. (The bays were later covered in EIFS, which provides the same insulation factor as the XPS.)

Still, use closed cell spray foam in the rim joists.

I prefer the boards because they're a consistent, uniform factory made product. On site spf can often be a hit or miss deal. The inch-thick spf may average an inch, but barely cover the sheathing in places. And, of course, there's the thermal bridging aspect.

There certainly is no controversy - rigid foam to the exterior is the best option

It sounds like your contractor is trying to do flash and batt with a clear r-value of 15. Fiberglass in the walls with 2 inchs of rigid foam is a clear r-value of 22 or 50% better.

Am I misunderstanding something here?

DV and others are exactly correct. Add the 2" (r10 XPS) to the exterior. Save money and skip the spray foam except at the floor joist. Go with open cell here, about 6-7", and save some money. Cont. your XPS over your joist band and down to your foundation to give yourself a continuous thermal break. (better yet, continue the 2" all the way down to the footer)
ALso recommend skipping the batt all together and selecting a blown fiberglass or cellulose product.

If going 2", you will need to strap it for attachment of siding materials. Whatever you do, do not let your contractor convince you the proposed flat and batt is better. it is not. my go to air tight framing system is 2x6 walls with air tight gyp, blown fiberglass or cellulose walls (not batts), huber ZIP sheathing, exterior foam (2"+), strapping and siding.

Thanks for the advice. You've confirmed my thoughts, and given me a lot more to think about.

How important is the airtight gyp? With adding gaskets or tons of calk and airtight boxes, I can see that adding a lot of expense... I'll have to look into the ZIP sheathing, I've seen that used around here.

Part of the issue is that our builder has been wonderful to work with, and I don't want to force him into using a lot of unfamiliar techniques. Foam on the exterior sounds important enough to insist on, plus its something I'm comfortable doing, and I'll be doing the siding myself, so that's fine. The foam should only complicate the brick ledge on the front of the foundation, and then I suppose also the window returns and sills...

You will want to check out the excellent article in Fine Home Building magazine about flash and batt.
One inch of foam will definately cause a condensation issue INSIDE your walls in your climate zone. I used to live in Lincoln Ne (go Huskers!) now live in much warmer Pa but it is recommended to be at least two inches of foam in my mild zone 6 climate.
Go with exterior insulation but pay attention to the condenation issues. You dont want mold happening.
We did Zip sheathing and are going with blown cellulose inside. The Zip was minimnally more $ Well worth it.

The overwhelming consensus is that foam board on the exterior is superior. Roger that. We are submitting plans in the next couple of days for the detailed bid from the builder (and hope to submit the building application very quickly thereafter, assuming the bid is generally acceptable). Next question:

What modifications do we need to make to the rest of the house to accommodate 2" XPS on exterior? I see issues with brick mold where we will have stone facade, windows, etc.? Since my builder has not done this before, I'm a bit at a loss, and I'm having trouble finding all of this info online. I may wind up doing all of the foam board install myself as part of the siding, so I'm concerned over this. Thanks for any thoughts!

Numero Uno: the framers have to set back the floorplates far enough to accommodate the thickness of the foam and the thickness of any furring being used under wood or vinyl siding.

Also, be sure windows are ordered with jambs deep enough to cover the greater wall thickness. At the worst, the trim carpenter may have to add some jamb extensions.

Numero Dos The designer/architect should set out specific nailing patterns and attachment methods. Also, specific treatment of the window flashings. If you're using peel and stick flashings, the top jamb p&s must be further sealed to the foamboard with builder's tape--Tuck, Tyvek etc.

Numero Tres XPS by itself is not an acceptable drainage plane. You must incorporate a weather resistive barrier, either under or over the foam. I use lapped building felt.

Here is a link that might be useful: Rigid Foam as water resistive barrier

With adding gaskets or tons of calk and airtight boxes, I can see that adding a lot of expense...

gaskets are relatively inexpensive. Down Sill Seal under sole plates. caulking for sheetrock to framing.
use foam gaskets at outlet & switches..10 per pack
@ HD/Lowes. I use hardcast brand #1402 mastic tape to
seal oversized cuts in sheetrock @ bath fans,& supply boxes.

worthy's picture is a good example of this
install done correctly.
his uno dos & tres are also valid points.
nice build worthy.

here in La. we don't see 2" foam boards, but I
understand that they are available in other climates.
for added R-value & air tightness at cost effective
price..this would be an area to invest in.
as also stated spray foam is 'average' fill.
actual depth varies from 1/4" to 3.5" for 2x4 walls.
better to install consistant foam to exterior.

we used to have a guy named Rollie here who
posted about a build he did. northern climate
great details..here is the link.

http://imageevent.com/okoboji_images/deloreshouse

note the air sealing gaskets. while in my area
we don't go this far..in colder climates these
are used quite often with better building practices.

what type heating a/c will you be installing?
load calculations?

best of luck.

-worthy,
I'm not sure what a floorplate is... is that the same as a sill plate? Do the sill plates need to be set back from the edge?

Windows, it's more complicated than just ordering windows with larger jams though, isn't it? I was reading on Green Building Adviser about innies vs. outies, manufacturers that don't want you nailing through foam... my head is spinning!

Nailing and attachment methods? That could just be long nails into studs and then furring strips, right?

If we just use housewrap, that would cover the drainage plan bases, whether we tape the foam joints or not?

-Energyrater,
It sounds like you're talking a lot about making the interior airtight. I certainly understand that, although I'm concerned if my builder/framers don't do this normally, I'll be asking A LOT of them to do all of these things. Are some of these things I could go around and do after? Such as caulking along the bottom off all the sill plates? Installing the outlets and switches was one of the things I was thinking of doing, so that sounds doable.

Is this all too much to ask from my builder? Thank you for all the advice!

did something stupid & lost my reply...oh well...

you'll find that there are different names for the
same thing. some are regional others. sole plate
sill plate floor plate..all the same

if you are using brick exterior cladding you'll
want to increase the brick ledge to inclued the
depth of the foam sheathing on the exterior of walls.
prior to brick being installed, seal any holes
that through sheathing. Worthy's pic is t&g
sheathing, I believe. if not t&g..then taping all
seams of sheathing should be done. I'd do it
anyway. you want this to be the first line
of defense for air infiltration.

the sealing of sheetrock/drywall is second line
of defense for air sealing. this is why I've
mentioned it so much.
It isn't asking a lot..just detail work. some
you can do..others like SillSeal needs to be
done while building is going on.
SillSeal isn't a big deal..its a foam gasket around
edge of slab. it goes over the anchor bolts to fit
tightly between slab and sole plate of walls.
prior to standing walls in place & anchoring it
in place..SillSeal is installed.
I perfer this product to caulk as it is a continuous
seal, whereas caulk isn't. you can caulk interior and
exterior of sole plates after, but it won't be as good
of a seal.

air sealing is all in the details. talk to your builder and
explain what you are trying to achieve. get him/her
on your side and learn together. hopefully he/she will
carry it to the next build. if not..you know that
you've gotten what you need for the house you'll be
living in long after builder & tradespeople have gone
on to next project.

any mention of blower door testing of house?
it is the only way to verify how tight the house
is. don't be fooled by builder saying they build
a tight house, every house is different.

be thinking now about air sealing of house,
mastic sealing of ducts as these things are
going to provide savings & comfort.
blower door tests house leakage, duct testing
tests ducts for leakage.

once you build a tight house, then sizing of hvac
is very important. rather than rule of thumb sizing,
invest in a load calculation to properly size hvac.
in a well sealed, well insulated house, the old
500 sq ft per ton often results in grossly
oversized hvac system. the tradeoff for all the
time & detail of air sealing is less tons of
hvac.

there are some really good articles on this site
not just limited to the one linked. check out other
topics listed on right of page.

http://www.energyvanguard.com/blog-building-science-HERS-BPI/bid/52136/GUEST-POST-Lessons-Learned-by-a-Reluctant-Owner-Builder

having the time to get it right now, is the most
cost efficient time. retrofitting & sealing later
will never be as easy as doing it right the first
time.
best of luck.