You can retro fit foam or blown in cellulose into those interior framed walls. 3.5" of insulation isn't helping in the attic. In many locales, today's code requires upwards of R40 - you probably have in the order of R8 or so there now. The biggest bang for the buck is insulation in the attic. Then consider the walls.
What's on the outside of the block walls? If you ever decide to put siding on it, consider putting a layer of foam insulation under the new siding.
You might be able to fill the holes of the block walls with foam, too, but I'm not sure how much this would do. You might want to try some additional research here.
Insulating the heat pump probably isn't a good idea!, but, if the ductwork is uninsulated, do that. The cheapest is probably to buy some fiberglass batts and lay them over the existing insulation. Buy it without a vapor barrier, since you don't want one in the middle of the stack.
Consider replacing the single-pane windows with some better ones, but in the interim, installation of some 3M window film weather proofing is quite inexpensive and gives a good buffer to the glass.