I can't think of any benefit to removing sand except for cleaning the foundation for better adhesion.
Closing off the crawlspace venting to the outdoors is highly recommended. By giving it a small amount of the HVAC flow gases/moisture won't build up there.
DO replace the poly barrier, and consider (strongly) putting down at least 2"/5cm of rigid EPS (beadboard) or XPS above the poly, held in place & thermally protected against ignition by a non-structural "rat-slab" of rough-poured concrete 3-5cm thick. Extend the poly barrier up the side of the foundation a bit and seal it to the foundation with duct-mastic or similar prior to spraying the foam on the foundation.
Since there are ignition sources (water heater & furnace) you DO need an ignition barrier between the foam and the crawlspace room, but it could be half-inch gypsum mounted on furring through-screwed into the foundation, or a studwall. A shotcrete approach would likely be more expensive, and are other spray on products, but wallboard is pretty cheap. A studwall approach with 2" of closed-cell + unfaced R13 batting int the stud bays (and NO INTERIOR VAPOR BARRIERS, contravening Canadian building code, but with some real building-science behind it) brings the total up to ~R20 for the walls (recommended, for almost any location in Ontario.) Alterntatively you could set a 2x4 studwall mounted to the floor joists above with the interior stud edges 6-7" in from the foundation wall and do it all in open-cell foam, but that's likely to be more expensive than 2" of closed cell + rock wool batts. I'm sure other combinations will work too.
Spraying a continuous layer up the wall and over the foundation & header is fine, preferred in fact, especially if it's closed cell foam 1-2" thick (but not thicker if closed cell.)
With the basement fully sealed & insulated with the ground poly replaced it will no longer be moist down there- it'll be both warmer and drier year round.
See also: http://www.buildingscience.com/docum...study-analysis
The hygric analysis in this document is for Minneapolis MN weather- adjust the foam/fiber R-value ratios toward the foam end if your location is significantly colder than Minneapolis.
If you had frost on the interior of the first-floor walls on the shallow end it could be from the lack of insulation in the crawl space, or it could be air leakage or insulation gaps in that location. Don't presume anything without further investigation.
The furnace ducts are best sealed with mastic at every joint, and taping the seams of the airhandler with FSK tape is also a good idea. In a fully conditioned crawlspace it's still a good idea to insulate the supply ducts (R6 is enough), but you can skip insulating the returns. Seal first, insulate after. Leakage loss energy typically exceeds conducted losses of an unsealed but insulated duct, defeating the purpose somewhat.
Don't be surprised if after insulating the walls & floor it ends up being the most comfortable spot in the house. Typical 2x4 batt construction runs about R10 on average, with the thermal bridging of the studs, plates & headers factored in, and it has plenty of air leaks & thin spots (called windows) where the R value is much lower. A blank sealed up spray-foamed foundation is more air-tight, and with fewer gaps & less thermal bridging. With R8-10 on the crawlspace floor it'll stay warm simply because its losing heat less quickly than the rest of the house, but that also raises the temp of the first-floor making it more comfortable to bare feet.