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We're looking at the potential to finish our basement out, but I'm not sure what all needs to be done with our setup first. Basically, we have a basement under half of our house, the other half is a dirt crawl space that has two little vents, one on either side. Between the two zones is a solid poured wall. The floor joists span across and so in between each is a slot between the two.

The house is old and so more recently they added/updated the HVAC. This included a new heat pump outside, furnace/air handler/fan inside and ducts ran throughout the exposed basement ceiling to new registers in the floor above. So as to add registers to the back of the house, above the crawl space section, they busted out a rectangular hole into the wall between the crawl space and basement and ran a duct branch that way. I've included an ms paint floor plan and side view to get an idea of what I mean.

Basement floor plan

(Blue lines in basement section are windows, orange in crawl space are vents)

Furnace side view

My question is, what needs to be done to finish and insulate this space? Should the crawl space be sealed off completely from the basement section? Including the hole surrounding that main duct and the gaps between the floor joists above?

Although there are downwards facing registers in the basement ceiling as well, I leave them shut off because it would seem pointless to try and heat/cool the space if it just flows out the crawlspace?

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    (Ah! What can be done with MS Paint amazes me. Even though I know Photoshop well, I still come back to Paint when I need to do a quick drawing or edit a screenshot. Those drawings are great.) – user48010 Mar 28 '17 at 0:09
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If the furnace is not one with an open flame, I would seal up / insulate the hole around the air duct that goes to the crawlspace side, then finish off the basement side as desired.

If the furnace has a flame, I'm not sure what you will need for combustible air and safety reasons. You definitely need a carbon monoxide detector on the basement side if there is combustion.

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