Again wood stove is in a finished basement. I will put the return low anyway so I don't think this is going to be a big problem.
I do believe it it would be against code but I'd want to double check that before I say it is. I do not believe you are supposed to return from the same space combustion is taking place. I know you can't return from the space the furnace is in. Not sure how that applies to wood stoves. I'd check with your local building official. Call him (or her) up and tell them you're thinking about putting a return in the basement where there is a woodstove. Is that ok?
We're talking about carbon monoxide poisoning here, so don't take it lightly please. It may be perfectly fine. I'd have to spend time I don't have right now researching it. So it is in everybody's best interests that you do the research yourself before you forge ahead.
On the subject of fiberboard, What Nick said ^^^
I've been in this business 30+ years. if it was me the fiberglass would go away where I needed to rework the duct and sheetmetal would take it's place. Guaranteed the fiberboard will be falling apart in 5 years if you go that route. My gut feeling is if you don't do this kind of work for a living you are really stepping off into uncharted territory that could get you in a lot of trouble one way or another down the road. Or at the very least a pissed off friend. It really does take a lot of experience to get it all right. That's what the $10,000 is all about. IMHO that's the best advice I can give you in this particular situation.