How do I attach the framing of a shorter wall to a higher wall above concrete?
As I understand your question, you do not want to run the inside wall all the way to the ceiling so that you can keep the wall space above the new knee walls. If so you will certainly want to cap the space at the top of the knee wall to leave a good grounding for a finished surface. One way that you can do this is to attach a 2x2 to the inside of the exterior wall and then bridge across from the exterior wall and the top of the knee wall. The bridging plank can be cut to width from a standard sized plank such as a 2x10 or 2x12. Installation in this manner will both support the top of your knee wall and cover the gap between the two walls.



In terms of finishing you could choose to cover this area with drywall or a nice looking board that you would finish to suit your needs.