1) metal vs wood studs. I've never had a problem with water in
basement and was just wondering which would be the better option?

Wood studs, 2x3 would be good. 2x4 if you got the room.
I would use pressure treated wood on the sill plates on the floor.
Ramset them right in.

2) How far off the cement walls typically are the studs placed to
frame the walls?

I would be AT LEAST 1" away from the outside wall. 2"
would be more comfortable.


3) insulation: What r-value should i be looking for living in
Michigan? Is the foam board a better option that the rolls in the
walls?

This depends too. I used r13 encapsulated insulation down
there. It basically provided me with sound and thermal insulation.
Worked out OK.

4) lastly would using greenboard be a overkill or should i just use
regular drywall.

Greenboard is good down there, especially on the lower half if you ever
had a flood. Otherwise regular is OK. I used allot of greenboard
because
at the time is was minimally more money. So I said why not. The only
spot
your not suppose to use it is on the ceiling (this was according to the
manufacturers info)

One thing to recommend is MAKE SURE that you do NOT have to put or do
any
additional work behind those walls. If there is plumbing or something
else behind those walls you need to make sure everything is tip top
shape before sealing it all up. Thats one of the downsides of drywall.
In my case most of my work was against blank concrete walls. Any
sort of access areas that I may need to go to I bought oak cabinet
doors off of ebay and make a frame. It came ok pretty good. I just
need to get my carpet guy in there soon to finish it up.

Tom