I have read your articles about the causes of a leaking basement, and solutions like rain gutter downspouts and sloping the ground away from the house. I have done all these things and my basement still leaks when it rains hard. The ground all around my house is nothing but clay, two feet below ground level. I am planning on digging out around my foundation (DIY), sealing the basement wall and backfilling with gravel and drain pipes. along with selaing walls with a tar-based sealant I was applying plastic seathing. A question I have is, can I fill the gravel all the way to ground level as long as I have excelent drainage around the foundation? I was thinking I can have a gravel barrier between the dirt and basement walls; however, does that forfeit any insulation property that the top layer of dirt would provide?
Gravel is not a barrier. It is coarse and will only speed up the amount of time your basement takes to flood.
If your basement leaks when it rains, there must be a problem with roof and surface drainage. If this is the case, anything you do below grade is pointless. I suggest you send a picture - that is, repost this question with photos of all sides of your house - showing improvements you made. I suspect we'll find one or more areas that could be causing your problem.
The idea of digging out the foundation (especially of removing the soil and replacing it with gravel, in your case) won't prevent flooding - in fact, will encourage it, because all of the water will have nowhere to go, and will lay against your foundation walls rather than run away from it. So take a few pictures and submit them and I'll take a look.