I think it is common to put some sort of vapour barrier on top of the
insulation. why?

Because as the vapour penetrates the wall, it gets colder and condenses out
within the insulation.

A normal wall does not need it. I'm thinking polystyrene,
then plasterboard screwed to brick, then skimmed and painted.

Think Kingspan/Celotex, which have twice the insulation value per thickness.
The vapour barrier can simply be foil that is preattached to either the
insulation or the plasterboard.

mositure does not penetrate a regular plastered and painted wall, does it?

Yup.

Why should it in this case?

Because it always does, unless stopped by a vapour barrier. An acrylic or
vinyl based emulsion and gypsum plaster have very little vapour resistance.
Oil based paints have some, but it isn't great. The reason problems occur
less frequently with a straight brick wall are (a) bricks don't care about
being wet as much as insulation and (b) they're so permeable, the vapour
often gets all the way through before condensing.

Any how, what is my best approach? I don't really want to spend loads on
state of the art insulation. A freind has suggested 'bubble wrap' as a
possibility.

Don't bother with second rate alternatives. One 20 quid sheet of celotex
will cover most of it, as much of the "wall" will be windows and not require
insulation.

Christian.