I have the Same Problem and am Also looking for Repair suggestions. My House is Circa 1920, the Foundation Walls are poured Concrete, but with a Heavy Sand and Large Sizeed Rock mixture. The inside surfaces of the Foundation walls are Crumbling, and leaving a very sandy pile up on the floor. The Walls are 12" thick, and the Flaking and Crumbling is to a depth of 3 or 4 inches in the wall. Average depth is about 1 inch deep.
In some wall areas, I can push by hand a 1/4" rod right through the wall, due to the Sandy mixture being very loose.
Should the all the Loose surface material be removed? Should I dig / scrape at the Surface untill I find Solid Material? What type of Facing or Coating should be applied before a new top coat of Mortar is applied.
I think, any one familiar with older home construction in Eastern Pennsylvania, will know the type of construction.