Damp proofing/finishing basement garage

Hi, have got a garage / basement space in our house in the damp Waitakeres. It's got very basic walls without covering - two walls are studs and paper backing, with styrofoam blocks stuck in for insulation by previous owners, the rear wall is concrete block backing onto our basement crawlspace under the house on a hillside. It got pretty damp and clammy last winter so I want to make it a bit better insulated this year. Am going to line the unlined walls with marine treated plywood and am considering painting the bare concrete floor with some sort of paint as well. Wondering if anyone has tackled a project like this and has any tips I haven't thought of. I probably want to paint the plywood walls once they're installed but not sure of the best paint to use in a kind of damp basement style environment. I'm not trying to make it into a spare bedroom or anything but basically we don't use it so much a garage as a rec room with treadmill, workbench etc down there and I'd like to see if it can be a bit less damp and spiderwebby in winter (it will also i imagine look a fair bit better in the long run too). Thanks in advance for any thoughts anyone has.

Is the dampness coming through the concrete blocks or floor?
If so, the blocks can be sealed on the outside, but the floor will be more difficult.
Make sure no surface water is getting to the space by putting in drains to divert water away. If it is just damp from lack of sunlight, then you are already on the right track, sort out some ventilation. A dehumidifier may be useful too.

Thanks! No surface water in the garage at all, there is a bit of water damage from years ago in one corner from when an outside drain blocked up but it is pretty minor. I can't tell if the concrete blocks have been given waterproofing in past so probably will slap some up there before winter just in case.

How about this
http://www.duram.co.nz/waterproofing/basement/

I cured a damp problem and it was water seeping through the concrete blocks. I had to dig a trench seal the outside with that black tar stuff. Line the outside of the walls with polystyrene then put in drainage under the foot of the walls. Dampness problem totally sorted. Fixing it from the outside is the best long term solution. The inside I lined the walls with polystyrene sheets then nailed framing on top of this then screwed the gib to the framing.

I have seen a similar product used - Aquella.

It is an expansive cement coating, as it cures it expands into the pores of the concrete, Esp good for concrete blocks, usually applied as a 'fixit' from the inside.