For starters the wall between the garage and living area needs to be a
sealed firewall...This is accompolished by hanging 5/8 Type X Sheetrock on
the garage side of the wall ALL the way to the roof...Then it musted be
taped with tape and joint compound to seal it...A fire rated steele door may
also be required...Check your LOCAL CEO for details.....I think the vapor
barrier goes on the house side of the wall between the insulation and
drywall...Perhaps somebody will verify that...HTH....
it doesn't need all that if it's NOT going to be a garage.
A proper heater, vented, is certainly the best way to go. Sounds like
you are running an unvented gas heater in a residential building,
which probably violates building codes.
I'd forego the ply and use 5/8" sheetrock. Its probably cheaper than ply
and is of course non flammable.
If you're thinking of using vapor barrier, the norm is to install it on the
"warm side" of the wall which means you probably already have it on your
inside wall, under your sheetrock which adjoins the garage. You don't want
vapor barrier on both sides of a wall..
I would add vapor barrier to the top of the garage before I installed the
"rock", to help keep odor/gases from seeping into the house