Foam on the outside is an excellent idea in an older house. A friend once put new siding on an older house. He took the advice of his neighbors who told him that foam was not necessary if he was careful installing tar paper. He was quite upset when the finished job leaked almost as bad as the original house.
I once added foam to the outside of an old house that was sheathed with some sort of fuzz board. The house was much more comfortable afterward, especially in the summer.
Foam on the outside becomes your vapor barrier. If you make it thick enough, the inside surface of the foam cannot condense, even if you fill the stud cavities with insulation.
A deluxe job would be 3" or 3.5" of foam, with 1/2" thick plywood/OSB on the outside for nailing the siding.
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