Awesome answer. While furring strips sound nice, I am wary of tapping
into my concrete blocks. I don't have any known water problems in my 8
year old house, but I don't want to mess with the structural integrity
of it either. I may suck it up and stud it, and create the decorative
shelf you were speaking of. This also gives me the advantge of being
able to run electrical back there, and conform to code all at the same
time. I can make up the lost room at the landing of the staircase by
knocking out a stud or 2 on the other side, like many of my neighbors
have done. Thanks for your comprehensive answer.