How awful. The studs and plastic were a terrible mistake. I think you are absolutely on the right track to replace everything with materials that are not degraded by water. Basements gonna flood.
Re-doing any basement wall that's made of concrete is easy in principle. Cover any such wall with 3-4" of foam insulation board (EPS, XPS, or polyiso), and seal and tape the edges. You can cut channels for electrical boxes (use metal ones). Cover it all up with cementboard (not any flavor of drywall) and then put on a skim coat of lime plaster, perhaps gauged with a small amount of gypsum to make it harden faster (advanced technique, practice it first). This is a wall that laughs at water.
Looks like you have a walkout basement. That means you have one or more stud walls. If none of the walls have wood at the floor, then you're good with the above advice, and you can cover up what studs remain with drywall or whatever, but do take the opportunity to remove the plastic vapor barrier in any stud walls (ugh, why are people so obsessed with vapor barriers?). You neither need nor want a vapor barrier in your wall unless you are north of Illinois, or especially in any climate where you'll be using air conditioning. In mixed climates, they cause more problems than they solve.
If you have any stud walls that go to the ground, it's more complicated. There is no removing all the wood from these walls unless you are willing to remove said walls and rebuild them out of concrete blocks. If the wood in these walls gets wet and stays wet, it will rot. There is no practical way to prevent un-treated wood from rotting in the presence of standing water. If it's just one wall, you could hire someone to rebuild the bottom few feet out of concrete blocks and then follow the above advice.