[TimJFowler]

Daox,

The more I think about your project (keeps me from working on my own 8*) ) the more I think there are two preferable options.

1) Quick and Dirty. Spend as little as possible, rewire the interior, insulate the walls and roof, use OSB for the interior walls, and don't touch the exterior.

I think if you try to remove the vinyl siding, add 1/2" or 1" rigid foam insulation and replace the siding you will have 1 or 2 problems. Either you'll not have quite enough siding given the slight increase in surface area, or some of the siding won't come off cleanly and either way you'll need to buy more siding which could be tough to match.

2) Dream Garage Makeover. I'm guessing your garage is also your workshop. If you plan to stay in this house for more than a few years why not plan a complete "eco-garage / workshop"? How about skylights or solatubes for lighting, solar heating, wire for future PV panels, super-insulated walls & roof, recycled and/or eco-friendly materials everywhere, etc...

Each plan has pros & cons. I just hate re-doing a project and sometimes it's worth going "all-out" on something rather than regretting not having done X or Y later.

FWIW,
Tim