What is the best way to insulate a concrete block wall from inside without having condensation?

im thinking about padding out the wall with 2x2s to save a little space how would i go about insulating it a few ideas are; plastic layer then wood with conventional insulation; or styrofoam or foam board strips please help with better ideas or just about which one is the best idea.

they sell that moisture barrier paper...
or ese styrafoam board..that whould work

plastic is the best bet. I don't know what area of the country you live in, but what I'd do is tape plastic to the wall, or staple it to the inside of your 2x2's then 2" of high density foam insulation. Stay away from the white polystyrene-it's a waste of money for the most part. It not very efficient, falls apart after a few years, and makes an awful mess if you ever cut into it. Get the blue, yellow, or pink foam sheets-and if you get the 'scoreboard', it's already factory scored at 16" so you don't have to cut it to fit between the 2"x2"s. For added insulation- get some of that tin-foil lookin' insulation and staple that to the outside of your 2x2's before you put your sheetrock or whatever you're going to use to finish your walls. It looks like bubble wrap with tin-foil on both sides. We use a similar product under cement slabs, and we've been seeing good results from the customers we've installed it for. The name of it escapes me at this particular time, but it looks pretty much as I described it. I'd stay away from the conventional fiberglass insulation for two reasons- one, if you're only going to use 2x2's you won't get much insulation, or you'll compact normal 4" insulation, which defeats the purpose- fiberglass insulation uses the airspace inside the fibers to do the insulating. Compacting it takes that airspace away. The other reason is that if you do get some condensation, the fiberglass will soak it up and rather than insulating, it'll become a conductor. Just some thoughts- hope this helps!

paint it with drylock

a vapor barrier always goes to the side towards the living space - putting waterproof paint on concrete walls is good place to start, then the studding and fiberglass/paper backed insulation, with the paper side facing the room, then sheet rock and paint - that's the standard way of doing it - use 2x4's - you won't get enough insulation in with 2x2's - you're only talking about a difference of 1.75 inches per wall difference

Have insulated outside walls in my block built home using
Furring , 1"thick furring strips on 16" centers w/ 1' rigid foam & covered with a vapor barrier then drywall.
Good improvement considering what I had to work with
Space was an issue ,but if you have the room 2''x2''s or 2"x3 's or 4s will give you room for thicker insulation & higher R value..
The plastic vapor barrier has to go over the insulation on the "warm" side to avoid condensation.
Basically ,furring, foam or other insulation to same thickness as furring,then vapor barrier w/ taped seams, then finished wall.
Don't know about best way, but the build out will be the same
whatever you use.
Another thing to consider would be electrical outlets & wiring
There are shallow boxes available for thin walls, but the wiring must be protected from drywall fasteners.
Best regards