I am insulating the lower level of my split-level home, where the floor lies about 3 feet below grade. I have put 2" rigid foam insulation between the studs on the upper portion of the wall above the concrete block, which of course leaves a void since the studs are 3.5" deep. On front of the studs are 1" furring strips, which extend down in front of the concrete block wall almost to the floor. I'm thinking of putting 1" rigid foam between the furring strips floor to ceiling in order to have some insulation inside the concrete block portion of the wall. This will leave a 1.5" gap between the 2" foam and the 1" foam on the upper wall portion. Is this okay?

Also, can I install drywall directly against the 1" foam or does there need to be an air gap there?

And do I need a vapor retardant sheet on the inside of the furring strips? FYI, I am in Indiana.

Thanks.