Goodnight, Irene: It's Time to Reclaim Your Basement
Toss everything, including carpeting, wall finishes and furniture that's too far gone. Then strip out all of the water-damaged basement construction, including drywall and wood framing. Anything left that's been waterlogged can be the source of future mold growth and all of the problems that can cause.
Once the basement is dry, test for air quality and any evidence of damp areas and possible mold spores. Use bleach or something similar to clean up any remaining areas of concern.
There's a little underground "roof" to shed ground water away from the foundation (see diagram). And there's making sure the sump pumps are on a backup power system such as batteries or a generator.
Maybe add a few windows or make the ones you have larger. A neat basement window product is the Bilco Scapwell.
Read on for some basement design ideas to get you started — whether you want to jump right on a project or are still just dreaming for now.