I used a thin 1/2" insulation board to bring the lounge walls out flush with the upper and lower aluminum tracking. I than covered it with 1/4 OSB. I was not sure if someone might lean into the wall panel and push into the foam so the 1/4 OSB gave it a little more strength.
I personally think any insulation is not needed, but I needed to raise the wall surface out 3/4 so its lighter than 3/4 plywood
I also started pre-wiring - I'll run a 220 to the back shop area and a few 110v lines up front.
The bathroom / closet
I used a mobile home shower board on the walls, if its ever used as a shower the water wont damage it (much)
and the door was installed.