Does anyone have experience using cement pony walls inside an old basement to strength and waterproof original walls? If so does it work or would you suggest a new basement?

There is simply no way to waterproof basement walls from the inside. The water comes in from the outside, and that is where it must be contained. Concrete itself waterproofs nothing. It is prone to cracking, and there is no way to apply waterproofing to the outside of the concrete wall, so, the waterproofing can only go in one place...outside the original wall.

As far as strength is concerned, you don't explain what the original wall is made of, or why its strength is suspect, so no comment is posssible.

Walls such as that are oftentimes used because of conditions that do not allow for convential repairs. i.e. cannot dig outside because of home being to close to another.
You must remember that the fource that is on the origional walls is down and in. The wall you would install will take over for the in pressure but will do little to correct any down pressure. Which in most times you do not need. But, you must understand that these walls will require a real good waterproofing system. If you do this incorrectly you end up with spending a lot of hard earned cash, and the wall failure in the future.

What is really happening at your place? Building a pony wall is quite a undertaking. These are usually done with failing brick foundations. Tell us your story and perhaps we can suggest other ways to repair this issue fro you.