Insulating story and a half : HomeImprovement

I have a story and a half home that I am tearing the plaster out of the up stairs. I would like to add insulation but the lath for the plaster is nailed onto 1*6 boards that were used to sheet the inside of the house. I seem to have two options,

  1. leave the sheeting and use a hole saw to blow in insulation

  2. tear down to studs and use batt.

Has anyone ran into something similar and what would you recommend? I do have an attic above and crawl space access if that makes a difference. Also live in Iowa so winters get cold and the house uses boiler heat.

Edit: Here’s a picture of the sheeting inside of an “crawl space”

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