There is a highly-manufactured building material used up north that consists of wall panels constructed like an ice-cream sandwich: traditional white Styrofoam sandwiched between two layers of half-inch oriented-strand fiberboard. It's got excellent insulation properties, but I'm not sure how well the OSB stands up to weather and I don't know how the product works structurally. Of
course that stuff -- bought new, anyway -- is about as far from a
sustainable building material as you can get.
You're talking about recycling blocks of old used foam in place of
hay bales. I don't have an opinion about how that will work structurally, but I know you'll have to protect the foam, or it will erode into those little white pellets that last forever in the environment and eventually wind up floating in the sea. My impression is that most bale construction is surfaced with some sort of stucco or
cob, so that would presumably be desirable with foam blocks as well. You might have to do something to the blocks (wrap them in
chicken wire?) in order to get the surfacing material to stick.