How can I improve the insulation in the lower attic space?
I own a cape with two finished bedrooms upstairs. We have knee-walls like you, as well as a cap space above the rooms (your upper attic).

We had both the crawl spaces (lower attic) and cap insulated. At the time, we were told there are two types of attic insulation: hot roof and cold roof. In a hot roof, the insulation is attached against the roof between the rafters and the air in the attic is considered warm. On a cold roof, the floor of the attic is insulated, making a warm ceiling, and ventilation and circulation occur in the attic itself (air comes in through the soffit and rises to a ridge vent or other ventilation device).

Ventilation is important for your attic and roof, so you'll want to be careful what you block up.

In my house, we used blow in insulation on the floor of the cap, and we used batting and foam board in the crawl space. You'll want to setup a ripping station outside, and you'll cut the foam board into lengths that fir through your crawlspace door. You carry them in in pieces, nail them to the rafters with special nails, and then use insulating/foil tape to seal the seams.