Home Improvement Questions? Ask a Handyman for Answers
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There's nothing wrong with OSB sheathing. In fact it's been used more often than plywood in new construction over the last decade. You can use fiberglass batts with a vapor barrier towards the living space. You can use regular sheetrock unless you want to skim plaster the walls in which case you'd use plaster baord.
If you plan on skim plastering you need to use plaster (blue) board. The only reason the OSB would get damp is if you don't have a vapor barrier behind the wallboard. Like I said before, fiberglass batt insulation is fine and used all the time in this application.
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