Insulation, Radiant and Vapor Barriers - stone foundation

i am buying a 200 year old house. the basement is 4 ft. high, with a stone and dirt floor. the walls of the foundation are stone and there are places where i can peek through the stones and see outside. any suggestions on insulating? my water heater is down there too.

May I suggest Insulating the floor above the basement? Before you attempt isulating the floor though, try to locate and block bypasses (openings that allow cold air from the basement into the house).
If the dirt floor is damp you should also consider installing a vapor barrier (visqueen). The leaky foundation should allow ventilation to/from the basement.
Doing this will turn your basement into an unconditioned area.
If you do this you must also consider insulating all water pipes and ducts located in this area (this may also include pipes from boilers) and your water heater.
Also, If these measures are performed the water heaters flue pipe must be double-walled to help ensure it drafts its gasses properly.
Some people might suggest a perimeter insulation, however I wouldn't do it if the dirt floor ever gets moist.