Wainscoting?

Could it be that the tongue and groove wood on the photos in the previous post is wainscoting? I have to admit, I don't know anything about it, but I looked around the internet and I found some pictures and descriptions that suggest it could be.

A couple more questions, to add to my list: Should I try insulate the gap between the old exterior wall and the new exterior wall before I drywall over it? And do I need to add any waterproof membrane or lining behind or below the new drywall that will touch the baseboards? The wall is behind the toilet and below a window, so it could get slightly damp, but it doesn't appear to have any current water damage.