Remodel rids closet of musty smell

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Q: Our 1920s bungalow has a small front closet that is punched out from the wall of the house so that the box of the closet extends past the exterior walls. This leaves the three walls and floor in direct contact with the outside damp air. We use this as a coat closet, but because of the outside dampness and lack of insulation in the lath-and-plaster walls, clothes get musty. The closet is very small, so simply adding a layer of insulation on top of the walls would make the closet prohibitively small. I was thinking of removing the lath and plaster, adding insulation between the studs, then putting up drywall with a vapor barrier. If I get particularly inspired, I may add cedar paneling. What would you suggest? A: Your instincts are right on. Insulating the walls will go a long way toward warming up your closet and eliminating the musty smell. But since you've started, and you're going to make a mess anyway, why not go for the whole enchilada and insulate the floors and ...