damp walls in a stick built home built in 1930

i have a home built in 1930 and have been experiencing damp on some exterior walls up about two feet off the floor. my house sits low on the ground towards the back it has a basement in the front part but just sits very near the dirt for most of the home. there are some tunnels dug out to get to plumbing areas, but that is about it. i have been wanting to insulate this house but have read that some of these old houses because they do not have a vapor barrier on the outside between the wood siding it can cause damp and rot because these houses were designed to breathe, very glad i read about this because i was considering open cell spray foam to be sprayed in the wall cavities because it did not involve removing the drywall..  my home also has vinyl siding on the outside, with no vapor barrier. any ideas on what i can do?? i wondered if i could open up the exterior walls add an inch of foam board cut to fit tight and caulk around it acting as a vapor barrier while still allowing the walls to breathe on the outside and water to slide away and dry up... then on the inside of the foam board putting up batten insulation then a vapor retarder then sheetrock...  any idea if this will work??   help me out, i want desperatly to dry out this house.. there is concrete ditch poored all along the back and sides done in an attempt by a previous owner to get water off teh foundation but it looks like the ground has shifted and in some places the ditch slopes towards the base of the house.. we also have a block wall out back that is about to collapse ... its about two feet from the house and about two feet high.  also has a concrete ditch.... at the back of the house i have nothing but sil rot in three rooms, i have been ripping out two of the rooms exposing the outer clapboard.  it appears to be board and batton back there no airspace, i need to built walls and insulate how do i go about using a vapor barrier there? do i need to strip off the cladding and vinly and put up plywood and a vapor barrier or can i get by with leaving it all intact and using the styrofoam board caulked and insulate the warm side??    desperate seeking answers... thanks..   heres the link to my prior post about my tempwood stove you can see photos of the house  you can clearly see what im dealing with, with the house being so low to the ground  https://permies.com/t/73681/Advice-clearance-tempwood-stove

It sounds to me like your walls are sweating from lack of insulation. Insulation will remedy this. As far as vapor barrier goes, those really hardly have any R value (or insulating effect), vapor barriers help prevent drafts of cold air entering the structure when the wind blows and warm air from leaving the structure from air pressure changes. I'm not inclined to believe that "these houses were designed to breathe". That to me sounds like a bunch of baloney. All houses breathe to some extent, and no one designs them to do that. That's goes completely against any energy conservation or efficiency.

I agree with your concerns of insulating while everything is damp/wet, as that will in effect reduce the air flow (or the homes ability to breathe) and may cause mold problems if that wood can't dry out first.

I'm not a home builder or engineer, but those are my thoughts. Perhaps someone else here on Permies knows more about this and can offer more information. I would advise consulting several different home builders and engineers, and see what they say. You may discover that they offer different solutions but that have an underlying common principle. This is how you can help weed out a crooked business person who wants to sell you stuff that isn't going to help and find those that are honest and want to get your home corrected.

My mother told me about a house they lived in Louisiana or East Texas in the 1920's. The house had nothing covering the inside walls, just the clap board on the outside. That house was made to breath!!!

There were also no screens, imagine the heat, the windows are open wide. I could add more to the screens story, but it's maybe too disgusting to tell here.

As an Engineer, I would suggest a lot of the problems may be coming from that embankment at the back.
Your description of what is happening suggest water is pushing the wall over, along with the solid just getting damp and loading the wall.
Many small walls years ago were built with nothing to stop them leaning over with time, caused by the weight behind it, even low walls, 2 feet.
I would have a good look at shifting that soil back, sloping the ground to remove the need fot a wall if possible, and improving the drainage so any water can swing past the hues.
If its not possible to dig back because of boundaries etc, remove the wall and build something designed for the job.
There are kits available that would required galvanised posts inserted into holes 2 feet deep for a 2foot wall and concreted in. Then concrete slabs, or thick timber slabs of suitable wood installed behind the posts.
AS you back fill the wall, start with screenings and a slotted pipe, so water pressure cannot build up.
That pipe needs to drain around the house again.
The screens column should be about 5 inches wide as the soil is backfilled and if you can place a mat like shade cloth as well, between the soil and the fine 1/4 inch stones to prevent soil washing into and blocking the stones,
thats another better outcome.

i think putting my money in the wall and reshaping of the property will be my top priority.  I tore out the floors in the back four rooms..  very wonky joists, i posted about them on here..  going to dig down and give the floor some crawl space and have a contractor to help with replacing the sills, he is supposed to give me an estimate soon.  i will be replacing all joists myself. .. ive decided to have my chimney lined and fixed and use a wood burner and free standing propane stove for heat during the winter and do without forced air for a year or two in order to put my money towards getting the land reshaped. i think it will be the best money spent, save the house first and then do upgrades later for heating and cooling ect.   we will be doing new wiring and plumbing and some insulating but preventing this back from sliding into the house definitely seems to be the place we need to start first. i appreciate all the advice, looking into the posts now to see how much it would cost to create a small wall.. ihave more land on one side of the hosue then i do the other so some sloping can be done. it goes pretty far up the hill.  I just have to watch one side where i am closer to a neighbors property and make sure i dont get over on theirs during this fix.  . thank you for all the advice, will post on this as it progresses.. got some great advice on here so far about saving this little house it is much appreciated.

Dude, drainage and venting the small space under the house. It needs to breathe. Your home was never meant to be airtight. Its on a foundation and or pilings. The water can sit in the soil and will only wick up wood or such. Proper venting of the under the structure. Drainage away a bit from the structure. Simple. Good luck.

I have to wonder about the 'drywall' in a home of this age. I have a house built in 1927 that has some 'stick' framing but the main walls are terra cotta block- which has cells running sideways. The walls are multilayered plaster over lath both wire and wood. They have beams that rest on the top of the block runs and definitely breathe, despite attempt by contractors to plug up scuppers with mud.
I suggest an exploratory window (or 3!)to determine the true composition and crawling around in the attic and underspace too. You might be surprised.