Our 2500 sq foot 40 year old home was damaged by a six hour fire. The insurance company offered 189,000 to repair the home. It need 5 new rooms plus a new roof and the entire interior is havily heat smoke damaged.

Homes can be bought here for 189,000. My question is what questions should I ask to decide to rebuild using 60 percent of the existing frame or tear it down to the basement and start over having a "new house"

your situation is as bad as mine, but you have one advantage, though it came from a misfortune...you now have the funds to start. You see, if homes cost this amount to but, but they are new, and you can rebuild with the same $$$, I'd rebuild just so that I would have the security in knowing that everything was new and also so that I could have exactly what I wanted. We bought a money pit, but we didn't know it at the time. I have since lost my job and the few repairs I have done myself don't really amount to much, we need a new home, but can't afford to move and we have no funds to remodel or rebuild. Consider yourself in a good position. I do not envy the reason, but I wish I were in your position right now.