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Default Basement wall too crumbly to finish over? Watch my video!

I want to finish the basement in my 1955 rambler. For the first 50
years, this house had no gutters. When we moved in there was
definitely a moist basement. We put gutters up in 2005.

While clearing away material from the basement walls in preparation
for finishing, I discovered some crumbling near the foundation base.

The concrete blocks have efflorescence. Some of the mortar joints are
crumbling.

The new insulation will be sprayed polyurethane foam, so it will be a
perfect moisture barrier.

What do you think? Is this wall too far gone? Watch my You Tube video
and let me know....

http://www.youtube.com/watch?v=iIHm25scHEU
 
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