I'm confused after reading about cement block basement insulation. I did about half my basement a few years ago with 1x2 strapping and 3/4" rigid foam glued to the block between the strapping. Added a vapor barrier over that, then 1/4" OSB skin. I left it about all about 3" off the floor in case of any water seepage. Now wondering if I should continue with that, or should I be worried about mold behind the vapor barrier? I've read opposite opinions about using that vapor barrier.
You are correct. A very confusing topic. The location of the vapor barrier.
Somewhat depends on your location. The very deep south is different from the "lower half" of the country and that is different from the "upper half". And the basement is different in all of them.
Generally, you want the vapor barrier on the "warm" side of the wall. The idea is to stop vapor from migrating into the wall and finding a cold surface to condense on and become liquid. (Vapor is DRY and liquid water is WET) In a heating dominated climate the vapor barrier goes on the inside, as close to the surface as possible. In an AC dominated climate it the other way around. The problem is for most of us, the climate switches back and forth summer to winter. So we set them up for the dominate climate and hopefully leave the other side of the wall "open" to breath.
In the case of a basement, the conditions on the outside are very different from above ground structures. The outer surface of the wall is constantly cold and damp and has no sun and wind to dry it. Hopefully what you have is a wall that has been waterproofed with an excellent material that is both water and vapor proof. Then there should be Vertical drainage that allows water to fall quickly to a footing drain where it is carried away. There should also be a sealant on top of the footing to keep water from wicking up into the wall. (almost never done locally)
What you have done is seal the strapping up between a potentially wet wall and an impervious film of plastic. Unless it was treated and your wall is very dry, it may be rotting.
Rot fungi need four things, Oxigen, Warmth, Food source (organic matter, in your case, strapping) and Moisture.
What might be better is to put the poly film on the wall, put 2 x 2 strapping over it, put 3/4 foam in between and then install the OSB over that, leaving the bottom off the floor and the top down the same amount from the ceiling to allow air to circulate behind the panels. You could screen the vents to keep vermin out.
This is using the poly film as damp proofing to keep the humidity out of the wall, not as a traditional vapor barrier. You could also paint the wall with Drylox and it might help a little, but I have little faith in it. It's on the "wrong" side of the wall and water pressure and vapor pressure will just push through.
This epistle is a very short version of this. I could go on for pages. As a Home Inspector I confronted this often. If you want some knowledgeable reading on this look up Joseph Lstiburek of Building Science. Might be the best building scientist in the country, except he is in Canada.
The Oak Ridge National Lab has a building science research division. I did some work for them before I retired. They have, or used to have, a public information service on the web site. Or you could find the number and call. This sort of thing is their reason for living.
From what I've been told, mold needs both water and heat to grow. While you didn't say that you sealed the block beforehand, I suspect the rigid foam + glue will be an effective moisture retardant (not a barrier). Your leaving the 3" open space at the bottom will help with a bit of air exchange to keep things dried out. You could assist that function with a row of holes (1-1.5" and 1 per bay) drilled along the top of the wall.
When I did my basement office (poured concrete walls) I framed with 2x3 and used craft-faced glass and then s'rock with no bottom gap, but open at the top hidden by a suspended ceiling. Floor is Homesoted and carpeted. We've had several "floods" from cellar windows filling up in torrential rains, but no issues in 25 years.
There's a whole lot of hype over residential mold; mostly from mold-removal "specialists."