What Do You Think Of This?

For those that don't know, our shop walls are cinder block that is painted with some type of water proof paint that is flaking off everywhere. In order to make our shop look better we have been considering covering the walls with some sort of paneling. We have gotten the majority of the moisture problems taken care of so that should not be a problem.

We were thinking of using T11 barn siding and leaving it unpainted. We would attach furring strips with foam insulation in between them and a vapor barrier underneath. This would then make the walls very versatile for attaching various things too.

What do you guys think? Will this work? Will mold form on the backsides of the T11? Is there a more cost effective way to do this?

Here is a photo of the way the wall looks currently. Only one wall is actually flaking off, the other three look fine.