MOLD!!!!!!!

This room was gutted and insulated about 8 years ago. As you can see, there is mold on the insulation and wood. The wood being cedar clapboard nailed to 2x4's. I guess I shouldn't be to surprised because I can see daylight when I look at this wall. The wall is also damp and it's a north wall that gets very little sunlight if any at all. What should I do with this mess, so I can get this bathroom done .

The drill bit is on the outside of the wall cavity. Right photo is in the basement. Left photo is above. The whole mess ends up in an upstairs closet{top right picture}. From this location, I'm thinking I can run it along the floor into a room and them build a false floor on the top of it. Is this possible? or am I nuts. I have a heating air guy coming over tuesday. He already told me where to cut some holes so he can run a return air duct up there. He wasn't real hip on the idea of running duct up there because there just isn't much to work with as far as accsess. I think the false floor idea would solve the accsess issue.