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Where do I start insulating basement?

The house is a 1940's ranch, 1,200 sq ft. I've done all of the insulating I can on the upper part. I've put in new windows, new doors and blew insulation into walls and in attic. Now it's time to tackle the basement.

Here is my dilemma. #1 I have no clue where to start or what to insulate. I've done all of the rim joist. That part I was sure of.
The basement is fairly big. I have a wood shop in one part, that area is about 17X25. I have a sub-wall that divides that from the rest of the basement. The wall is just a sheet of plastic that keeps the dust from getting into the rest of the basement. I want the upstairs floors to be warmer, but I don't want to cut off all of the heat to the basement either. The walls are block, the kind with the holes inside. They have recently been waterproofed with Thoroseal. The walls I don't want to insulate. If I do, the town will consider it a finished basement and my taxes will sky rocket. I was going to put insulation on the ceiling part, but then I see that the insulation will be exposed. That will be a problem in my shop because of dust.

The guy who built this place was a total idiot. The cold air return passes right through the I beam. It's a steal I beam, so the air has to go around it where ever it can. They just boxed in what they could and called it a day. The bottom of the box is some kind of paperboard and has gaps all over the place. Does a cold air return do anything given that the new furnace draws it's air from outside?? All of the heat pipes run well below the joist level so putting up a ceiling is impossible. A drop ceiling wouldn't be too feasible either. Can I insulate between the joist then put plastic up to help keep the insulation clean, or will this cause a moisture problem?? Am I supposed to insulate the heat duct pipes too? I wanted to post pics but I guess you have to have at least 10 post first. I'm a Newbie. :o

My second dilemma is what to do with that crawl space??? I have no idea of where to start. Every place I've looked on-line there is a different method. Some I see it on the ceiling, some have the heat pipe wrapped, some have just a 6 mil vapor barrier, some do vapor barrier and side walls. I'm totally confused. This is going to be phase 2 of the project.:D

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