I would thing something more resistant to mold to cover basement floor than carpet , vinyl flooring system might be better , I'm not sure about it's sound dampening quality, perhaps a thin layer of solid Styrofoam as a sub floor under it would help.

Strapping on the walls with "blue board" drywall might make it a nice finished space, could Styrofoam behind the strapping to insulate there too.

I think there might be some other threads about dampening the chimes themselves. foam tape perhaps?

If you made horrible clanky Williams chimes sound good, you should just enjoy that. It ain't easy.

Just use cotton in your ears. Much cheaper and easier solution

Maybe try a little rockwool?

Lay something soft and absorbent over the chime bars. If it deadens it too much keep trying different things. Almost used up paper towel roll, piece of cloth, etc. Experiment.