Based on your location do not put a vapor barrier on the inside. If you use faced insulation, cut some slits in so any moisture can escape.
I have researched this topic to death. Only fail safe method I have come up with is that insulation must breath on one side. Vapor barrier is commonly used on the side with the most moisture. Here in the south that is the exterior wall. In very cold climates it is usually interior walls due to types of heat.
If any other factors confuse me, i use unfaced bats or cellulose with no vapor barrier
For us in the south, never have I heard it explained so well in so few words Rosco. I share your "theory" and am using it in my new build. Preventing the flow of cold air from the outside, using thick insulation of wall cavities and no vapor barrier or retarder on the inside of wall so that as you say the insulation can breathe on one side. This ol' hippie puts it pretty well here >
http://www.greenbuildingadvisor.com/blogs/dept/musings/do-i-need-vapor-retarder
He does away with all the charts and graphs and explains it in pretty easy to understand English
Q. Is there any reason I have to know the exact perm rating for the materials I use?
A. No, but it's sometimes useful to know whether a material falls into a broad category — in other words, whether the material is vapor-permeable, vapor-impermeable, or somewhere in between.
To simplify the situation, I’ll list a few materials that are considered “vapor-permeable” — that is, with a perm rating over 10 perms. These materials include gypsum drywall, plastic housewrap, fiberglass batts, cellulose insulation, asphalt-impregnated fiberboard sheathing, and 5 inches or less of open-cell spray foam.
Next, let’s list examples of materials that are considered “Class III vapor retarders” — that is, with a perm rating between 1.0 perm and 10 perms. These materials aren't vapor barriers, but they slow down the flow of water vapor somewhat. Examples include stucco, one or two coats of latex paint, 1 inch of EPS foam insulation, and more than 5 inches of open-cell spray foam. (Note that the greater the thickness of a piece of foam insulation, the lower its permeance.)
The next category is a group of materials that are considered “Class II vapor retarders” — that is, with a perm rating between 0.1 perm and 1.0 perm. These materials slow down the flow of water vapor to a greater extent than materials that are considered Class III vapor retarders. Examples include plywood, OSB, the kraft facing on fiberglass batts, 1-inch-thick XPS foam insulation, and one coat of vapor-retarder paint applied to drywall.
Finally, the most impermeable materials are called “Class I vapor retarders” or “vapor barriers.” There materials include glass, sheet metal, aluminum foil, and polyethylene.
Q. Information overload! What’s the short version?
A. OK, we’ll break all this information down to a few rules:
Most buildings don’t need polyethylene anywhere, except directly under a concrete slab or on a crawl space floor.
The main reason to install an interior vapor retarder is to keep a building inspector happy.
If a building inspector wants you to install a layer of interior polyethylene on a wall or ceiling, see if you can convince the inspector to accept a layer of vapor-retarder paint or a “smart” retarder (for example, MemBrain or Intello Plus) instead.
Although most walls and ceilings don’t need an interior vapor barrier, it’s always a good idea to include an interior air barrier. Air leakage is far more likely to lead to problems than vapor diffusion.
(Mods, should this thread be in Heating and A/C to make it more easier to search?)