oh lord I would never use carpet in a basement. carpet is a notorious herborer of mold and mildew. ANY flooding would require immediate and thorough response to ensure no mold grows in the carpet (which, btw, you can't always see--carpet can have a nice thriving colony of mold between the backing and underlayment). if you must have carpet, be sure to have a vapor barrier installed between the concrete and carpet. you can insulate the foundation till the cows come home; concrete is a most efficient conduit for moisture to travel up into the living area. then again, no covering is perfect. wood is a better choice IMO; it gets damaged too by water but you can replace whole sections of it and with proper sealing, it won't be as vulnerable to moisture. you can then put washable throw rugs all over the basement floor. rubber might also be an option. you can buy rubber flooring just like they use in gyms and you can now get in many attractive colors (type "ecofloor" "econights" or "ecostone" into a search engine). it can be smelly, but it goes away; one way to air out the smell is by laying the floor in an unused portion of the garage for a couple weeks before installation. basements weren't meant to live in, but if you must, watch your moisture levels.