What is the best way to insulate this porch to a livable bedroom? (See attached image)
This is a good question. Many people in your scenario think they can simply convert a porch into usable living space by insulating it. But when you look closely at photos of what are essentially roofed-over decks or screened-in porches, you can see - like in your case - that the foundation on the main house is different than what is supporting the deck.
Typically the foundation required for anything considered finished living space is much sturdier than what's here. Some parts of country have no code enforcement, and maybe you live in one of them. The point stands, though, that you don't want to sink money into a conversion only to find out from the code enforcement authority when you go to sell, or to get a loan, that it's substandard, and that they're not going to insure it or pass it through inspection. You have to address the legality of this project first. To me, this does not look like an addition - an addition would have a solid foundation. If that's the case, you would have to frame it out as you would any addition: Fully-framed walls with siding, insulation in walls, ceiling, and floor, wiring, lighting and the like. There's a good chance your porch is just a shell, and that converting would be a far bigger project than just insulating it if the end goal is usable living space.