I have a very similar situation. I left the batt insulation in the exterior wall stud bays (on top of the concret wall), and put XPS on the lower concrete wall. I then framed out my interior 2x4 wall in front of that. The gap between the interior wall and the concrete + XPS is at most 1", and the gap between the interior wall and the exterior framed wall is ~3". I will soon be putting batt insulation in the interior 2x4 walls before drywalling. I'm told that the 2 layers of batt insulation is not an issue since the kraft paper is not a vapor barrier, but rather a vapor retarder.
I played around with building some type of shelf above the 2 foot concrete wall section, but it ended up just being easier to frame the full interior wall.