Cliff notes version:
1) Sealing holes where furring strips were attached to the walls- use hydraulic cement or epoxy?
2) Drylock over the area or use something else?
Long version:
I've done lots of research on this topic, but was hoping to get some specific recommendations for my particular application. I've started my basement remodel so the first thing I have to address are the walls.
Background:
House is block construction full basement walls, built in 1955. I am the second owner, been there for 1.5 years now (yes the previous owners lived there for 55 years). There's no sump pump- but from the construction documents there's a french drain installed that drains to the sewer system (that would be not to code today...)
It had god awful paneling in the basement- where the furring strips were nailed right into the concrete wall

. I plan on fully studding the basement and adding insulation. But first:
One corner of the house had some minor water issues, during the home inspection the inspector noted a higher moisture content in the wall. And when it rained there would be a damp spot appear on the baseboard. However- it never pooled or even collected on the floor. This was corrected fairly easily- the outside of the house started sloping towards the wall, so I spent a few days last year with a shovel raising the level around the house and putting in window wells in that area. I tore out all the paneling and the water intrusion was evident from the paint discoloration and flaking, some very small mold growth along some cracks I cleaned with bleach.
After correcting the outside, during torrential downpours- I get a *little* bit of wetness of where the holes of the furring strips were nailed into the wall with cleats. It's pretty minor- I have to be looking straight into the hole with a flashlight to see it shimmer a little.
My plan- is to use some hydraulic cement to patch the holes and cracks. But I'm reading that hydraulic cement is not good, as it only lasts a few years but an epoxy is better?
And then, I plan on using Dryloc over the walls where the water issue is/was. As stated previously, I believe I've taken care of the vast majority of the water issue- which wasn't even that bad to begin with. Just some real minor stuff when there is very heavy rain. Any advice?
The corner at issue: (that's peel away 1, as I'm stripping the paint) The dirt you see some of it is rust from the cleats where the furring strips were.