Framing basement wall against blanket wrap insulation in tight corner

Question

My house, located in SE Michigan, was built in 2012 and basement left unfinished by the builder. The basement is insulated with a wall wrap insulation blanket that is rated at R-11. The blanket is secured to the top plate and 6" above the concrete floor to a 2x4 attached to the wall. The insulation extends from the wall 3-5". The stairs leading into the basement are tight against a wall which leaves no room to frame in front of the insulation blanket without blocking the stairs. My question is how to go about insulating and framing at the bottom of the stairs.

Options I can think of:

1. (Worst) Frame in front of the insulation and block the stairs by a few inches.
2. (Bad) Leave that section of wall (5'8") unfinished.
3. (Better) Remove the insulation, frame against the concrete, and fill the voids with insulation batts.
4. (Better?) Frame against the concrete but cut into the insulation blanket every 16" so the existing insulation fills the wall cavities.
5. ???

Answer 1

Since the goal is to minimize the depth of the new wall to be built, replacing the insulation with something that possesses the equivalent R-value should be considered. A 2" layer of foam board insulation might be enough, but spray foam would be your best bet (though expensive). Instead of adding a framed 2x4 wall, you could opt for 3/4" furring strips screwed into the wall (through the insulation board) for hanging drywall.