pressure treated wood for bottom plate what for studs?

We have a converted garage. The previous homeowner did a poor job in installing ceiling panels. We want to tear them down and expose the rafters, but am concerned about insulation. How does this work? Any ideas would be greatly appreciated. TIA!

Hi Guys, I've got a single story ranch home and it doesn't really have a basement, but rather a 4 foot high crawl space. You take a ladder to get down into it from one of my bedrooms, and if you crouch down you can walk around down there. The floor is a thick black plastic tarp, and the top is all joists underneath my floor. There's a light switch and therefore a couple of lights that come on to illuminate the area when you're down there, but that's about it. The total size is about 50 feet X 70 feet, so it's a pretty good size, but I can't think of anything cool to do with it. A friend suggested I could go ahead and finish it, but that would be a little ridiculous to be walking around on your hands and knees down there. hehe Besides, there's no real floor -- just that plastic tarp which I think is over some dirt or something. Any ideas from the peanut gallery on how I would address the floor issue if I wanted to go ahead and finish it?