I am gutting my 8x8 bathroom for renovation. There is currently no water damage, with regular sheetrock, and kraft faced insulation in the exterior and ceiling (unheated attic space above). There are no major problems with the insulation or sheetrock save for a lack of interior insulation which means when you make any noise everybody in the house hears it. The renovation is for asthetic and multiple minor reasons (cracked drywall, acrylic tub finish worn, vanity in poor shape, odd & noisy bath fan needs replacing, etc). It was just better to start over. My questions.....

1. I would prefer to use the plastic encapsulated insulation by Owens Corning or Johns Manville, but nobody carries it or can get it in central NY. I prefer it as it does not irritate as much during installation. Does anyone have any suggestions on a source?

2. Barring this, I can use kraft faced insulation or unfaced with separate vapor barrier. I will probably use kraft faced because it held up well before (but was horribly installed) and is more readily available in this area (unlike the plastic encapsulated stuff). Does anyone have any preference as for the placing of the kraft vapor retarder (inside the studs or overlapping on the face of the studs)?

3. For the interior walls, since both sides are heated, does it matter if the insulation has vapor retarder or not?

Thanks for the input!!