Should I COMPRESS fiberglass OR use foam insulation?
If you use anything Use foam, fiberglass gets its R value in the volume. 
The block wall actually has an R value, I think when I poured my shop walls there was foam on outside and inside and I think the wall was rated at R 50. Since you have a solid wall I might just have an air space. As 1” of foam is expensive for the R value and the air space is actually an insulator. I would base my choice on the r value of foam panels vs the cost.