The first thing that you should be aware of is that white polystyrene insulation acts very much like fiberglass. It will absorb water, requires a vapor barrier, and needs to be protected. The blue or pink variety of this insulation is called rigid foam insulation, and does not absorb moisture. Therefore it does not require a vapor barrier. Both methods that you describe have their drawbacks. If you place the polystyrene blocks flush with the concrete wall and install the 2x4s over them, then you have lost some floor space. If you install the 2x4s first, and then place the polystyrene blocks in between the 2x4s, then you will have the tedious and time-consuming task of measuring, cutting, and installing numerous strips of insulation. There are other alternatives that are much easier to work with. The first is to install the 2x4s and place fiberglass over them, or use rigid foam insulation and a metal channel or wooden strapping staggered every 60 cm (2 ft). Using either of these eliminates the need for a stud wall. All that is required after that is the installation of drywall.