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Insulating Under Lath

I recently purchased a home that was built pre1900. The walls in the bedrooms had this horribly hung pressboard. I have removed all that to find that there is still lath underneath (there must have been plaster at one time). My plan is to hang drywall over the lath, but I am wondering about insulating the outside walls before I hang. My friend suggested hanging plastic and blowing in insulation, but my concern is that the plastic may effect the moisture breathability in those rooms. Also, I'm concerned about mold and bugs in the cellulose. Any suggestions....?

MLB Construction
Re: Insulating Under Lath

strip off the lathe, insulate and put up your sheetrock.

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