OK, let me qualify my statement more clearly.

The OP stated he has hollow block walls with a tiny air gap and 3/8 drywall on the inside. Depending on whether it is skinny, medium, or heavy block, the r-value will fall between 1 and 2. The home is 30 years old, so there will be gaps or cracks in the block that will cause infiltration. He can't get to the top of the walls without tearing off the roof. Money is tight and winter is coming.

Yes, eventually the outer envelope should be improved upon. Wrapping the house with foamboard would take advantage of the thermal mass of the wall and eliminate the need for interior insulation. This involves tearing off siding, inspecting, repairing, insulating, wrapping, sealing, residing, and finishing. When time and money is plentiful, this project would radically reduce the home's heat load and save tons of energy. With great investment comes great gain. Oh, and don't forget the windows and doors.

Insulating the walls from within tackles more than one problem inherent in their design. Block walls are lossy not so much that concrete is a good conductor of heat, but because of the free air inside. Natural convection transfers lots of heat from the inner to the outer surface. Infiltration occurs everywhere it can, aiding this convection from both the inside and outside. Blowing foam into the cavities shuts down the convection cycle and plugs up the infiltration leaks. The worse shape the wall is in (thermally), the better it works.

MN, you are right. This is not a be all, end all solution for insulating the walls. Efficiency levels are not instantly going to become stellar. But it is a good first step that doesn't take long (1-2 days vs. weeks) or cost much ($$$$ vs. $$$$$) to accomplish. And a $400 a month heating bill is better than a $700 a month heating bill.

I'm a little confused though, I though code for pretty much everywhere as far north as Michigan would have codes that dictated at least R13(..or maybe R11?) cavity insulation for above ground walls in the 80s. Seems a little weird that this house doesn't seem to have any or at least that it isn't easy to find. My house was built in 1985 with 2x4 construction with cavity insulation that I assume is R13 and 3/4" XPS wrapped over the sheathing to help with thermal bridging. My house was part of a cookie cutter 'moderately low cost for what you get' high volume construction project. I'm halfway considering talking to the dozen plus neighbors who have the same exact house design and telling them how they can relatively easily remove the major thermal bypasses in the vertical wall section of the knee wall, sealing top plates, sill plates, penetrations, and to beef the 12" of insulation that they were told they were getting when the houses were built yet I only measure 7" in my house and that's well beyond the realm of settling.

I guess I'm trying to say is that I have a hard time with the idea that a house built in the 80s would not be insulated or that the codes didn't exist in Michigan for them to be insulated.

Did you ever get an energy audit done on the house?

No I did not get an official audit done..... but a mechanical contractor friend and I went through the house looking for issues.. I knew most of them already, old windows, leaky doors.

but I calculated that if I run my 40,000 BTU furnace constantly the gas bill can only max out at $198 a month. so if I half my energy bill in the coldest month I might save $100 and we only get 2 or 3 months that cold here so I would calculate a annual savings of $500 max per year for a reduction of 50% of usage. to get there though I figure I would have to replace all the windows and doors ($2500) and insulate the walls ($1500) and replace the siding to do the insulation ($1500). This might reduce the usage by more then 50% but the law of diminishing returns would say that 70% reduction is about all I can get. The payback of this major investment is a rather long time (7-10 years). the other issue is that I have to do it all at once so I would have to save up for a year or two to get that cash.... now I am 9-12 years out on payback. I have no idea if I will even live here that long.

how much should I invest into a 1953 home?

Sounds to me you're talking yourself out of a lot of work. Best bet is to find a buck stove (craigslist ~$300) and install it before winter sets in. Gear up with some thermal underwear, a chainsaw, and a wedge. Chop lots of wood from the forest and save tons of money on natural gas. It'll be good preparation for the work that lies ahead. Bide your time and ponder the money hog that is known as a home.

I wanted a house with a wood stove. But this house does not fit that bill can't have one due to the insurance company. there's not a really good spot to put one anyway :(

I have a chain saw, maul, wedges and lots of experience with wood heat but I will have to wait till my next place to have one. Unless I leap fog that and get/ build a net 0 home.

Ok, so throw together an outdoor wood fired boiler. With only 900 square feet to heat, you should only need one radiator.

It would be fun to try building my own outdoor boiler ...... I would need a wood supply and the cost to retrofit my forced air system might be a bit too high, but it would be a fun project...... Himmmm fire or water tube design?

9-12 year payback is still better than what you can get in aggressive stocks, especially since its guaranteed, and you're improving the value of your home, and your comfort.

Your house would be nice and toasty as it is , with a Mini-split heat pump saving money and heating your house for 30% the cost of other heating sources.