I think that with 2 foot thick walls you may not need a great amount of insulation. If you are up north, consider 6" thick r-19, otherwise a 3.5" thick r-13 bat insulation would be fine like here in Kansas with an 8" thick concrete basement wall which is pretty much standard.
I am not sure of your costs, but around here, r-13 kraft-faced 3.5" batt insulation is about $12 for a 40 sq.ft. bag. For an 8' tall wall, that figures about $2.40 per running foot of wall. A 1600 sq.ft. house (40'X40') would run about $384.00.
I haven't priced blown lately, but it used to be fairly expensive and you had to rent the blower.
I am still concerned about settling, and especially, even with a vapor barrier, you are going to get some moisture on the walls which will then soak into your insulation and ruin it. An air gap also provides an extra insulating factor just like between double and triple pane glass.
Owens-corning has an 800# to call and them and others have web sites with information. Do a search on insulation. You may be able to email them for info. Whatever you learn or decide to do, post back so everyone will know. I also would like to know how your cost estimates were based. Good luck.