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where to fasten top furring strip for basement wall

home was built in 1949. the basement isn't insulated. it's a poured concrete wall, so its relatively straight and smooth all way around. but the top sill plate that the floor joists rest on is about 2" higher than top of wall and in about the same. i want to strap the wall to insulate. but not sure if i go to top of wall or put 2x2 all way around top of wall to bring it out flush with the wall and strap to that. since i have two windows where the top frame is flush with top of wall.
i have a couple of pic's if they turn out ok to give you an idea if you can see what i'm talking about.
p/s thats not panelling in the pic's. previous owner put up look like wallpaper. do i frame around the windows and not go over top. i want to replce them with newer next year.
thanks don

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