should i insulate walls while finishing b-ment?

My unfinished large basement near Philly is cool in winter -- not cold. I have guests sleep there, sometimes they use a small electric heater but its not bad. And its cool in the summer. I want to finish the basement. I have no water leakage even during heavy rains, but a french drain exists around the basement -- done by the builder. I'm curious about opinions on:
1. sheetrocking on top of 2x4's on the walls. If I can avoid insulating, should I? Does insulating between 2x4's expose me to other hazards. If I insulate, I don't need much -- but what insulation is best to use that will fit in between the 2x4's and not have problems with mold?
2. If I choose not to insulate, then why bother with 2x4's which decrease the square footage of the basement. I'm wondering if I can just attach 8x6' (or something like that) vinyl panels I see at H. Depot. They have nice looking patterns on them, and make the walls look a lot better than exposed cinder block. I guess they're usually used in kitchens but they look great. They're usually nailed into sheetrock I suppose. I wonder if they can go directly onto the cinder block walls or is this a stupid thing to do from a mold perspective.
3. For the roof of the basement, I can use a drop ceiling but I don't like that it decreases the height (even though I have a deep basement). I'm thinking of just sheetrocking, and using insulation to keep noise from upstairs from reaching the basement (which occurs now). Is there any kind of *sound proofing* sheetrock I can use instead, so I don't have to needlessly insulate my entire basement ceiling just to eliminate sound ;)
TY all for any advice Jason Shohet
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jason wrote:

INSULATE! It will be more comfortable and you will save energy. Since the walls are not supporting anything you can get away with 24" centers instead of 16". You can buy fiberglass insulation that width.
As for the panels right on the cinder block, it is probably not a good idea. You could use 1 x 3 furring strips and still put 3/4" of foam insulation.
I don't know about the soundproofing of the ceiling. It has been discuessed here beofre so yo can do a search on Google Groups. -- Ed snipped-for-privacy@snet.net http://pages.cthome.net/edhome
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