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1940's house, no sill. tips on insulating

Hello All,

I purchesed a 1940's era house that had at one time a finished basement.  I have been slowly ripping down the remaning finished bits to open up the ceiling and insulate and then paint it all black, to have a nice open clean look.

Upon taking off some of the faceboard around the perimiter, I have noticed that my rim joist sit directly onto the blocks for the basement.   It doesnt appear to have any sort of protection where it joins and putting my hand up I noticed a small draft.  I see no signs of water damage or rot, so i am fine with "if its held up this long, its good"

However, I do want to insulate the basement a little better and I am looking over ideas on how to stop the draft and perhaps put up some foam board.

What should i use to fill the gap between the wood and the block?  butyl caulk, spray foam?  perhaps just a skirt board?  Should i caulk it off prior to cutting rigid foam board and then caulk around that to prevent inside air hitting it?

Open to suggestions.  I can provide pictures ff required.

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