I would recommend that you go with the blown in foam insulation, especially how cold it gets up where you are at. Not sure if a vapor barrier is necessary with the foam though. It is more expensive but the results are tough to beat. I would get estimates and advice from local contractors who are reputable though.
As far as the draft, I would consier some kind of caulking or sealant on the inside of the house where the draft is coming through. On the ourside I woudl look into the paing on or spray on rubber coatingat the seams where the draft is coming in. The rubber is weather resistant and will fill/seal pretty well.
Check out the website http://makeitright.ca/
from Mike Holmes, the famous guy on HGTV who does a LOT of work up in Canada. He has a lot of advice and links that may be helpful (to include contractors).
Not sure if this helps but good luck with that work.