If you weren't having water issues you could buy an insert window and keep the old window jambs. You probably won't be able to get a cheap vinyl (pvc) in an insert, but in a clad window you can.

You could also try wood conditioner to open the pores. Running lumber through a planer often closes the pores and will prevent stain from penetrating.

I'd just use a r-38 faced fiberglass insulation, assuming you have 2x12 floor joists and not I-joists or floor trusses. then use a 6mil polyethylene for the vapor barrier.