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19th century basement walls

Our home was built in 1878. Most of the basement walls are covered in paneling, that we want to remove. Where the basement is not finished the cement walls are smooth and in other areas the wall is dusty where the cement has "dried up" and the small pebbles are visible and the surface is pock marked. We don't get water in our basement, but you can see where water seeps through the foundation and leaves little discolorations (dirty tears) on the interior walls. I would like to get advice for how to care for the walls and the best way to prep them for eventual drywalling.

Q: I suspect the moisture that seeps in is by design? If so, how do you drywall so that the wall still breaths and doesn't trap moisture?

Q:Is there some sort of lime cement coating I should be applying to these walls to "fill those pock marks" where the old cement has deteriorated?

Q:Is there a good book/reference someone can suggest that references homes of this age?

Thanks in advance!!!

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