[Christ]

Nah, just use insul-shield (it's basically fiberglass mat wrapped in aluminum foil) on the body of your car. Even if the pipe comes in contact with it, it won't burn.

I don't actually wrap the pipes up, other than headers if I'm using one. The best insulator is dead air, so the best way to insulate your pipes is with more pipes. This makes your pipes heavier, though, from being double walled. It will also quiet your exhaust's resonant noise, since there's a layer of dead air to vibrate, then another layer of steel, before finally making audible noise.

The last time I actually insulated one, I just made sheet metal half-moon shapes that I could follow the car's exhaust path with. Put some insul-shield above the exhaust, and put more in the half-moon, then tack the half-moon up to the floor with aluminum rivets. (Leave tabs on the metal when you cut it out and form it.)

You can do this from the firewall back, basically, on cars where the exhaust has a place to tuck into the body. (I did mine on a 4th gen Honda Civic). It gets a bit trickier when the exhaust no longer tucks into a pocket in the body, then you have to either make bigger pieces of pipe to tack to the body, or use double wall pipe.

DBL wall is pretty extreme, and probably isn't worth it's weight on a car on the street. It's nice for motorcycle headers, though.

One thing I'm not sure about, though, is the header wrap and rusting pipes. I'd assume it's correct, since that wrap will absorb moisture, salt, etc and keep it right there w/ the pipes. Since wrapped pipes are essentially a cool version of an annealing furnace, having those corrosives right next to the hot pipe is just inviting disaster.

Ways around this include aluminized, zinc plated, stainless, and straight aluminum exhaust pipe.