For some good cheap insulation use neoprene the stuff that wetsuits are made from. Diving in 50F water with a 3mm wetsuit on is chilly but bearable.
Neoprene - Wikipedia, the free encyclopedia
Look up a dive shop in your area and ask them if they have any wetsuits that are worn out (rentals/class used). Worn out ones will have holes in the knees and arms but you just need the chest part (I would let them know what you are doing with it). You could then sew a pouch/cover for the battery there also is a glue that is made for neoprene but probably not needed.
If there is not a dive shop in the area to try and get free neoprene you can get some here
Seattlefabrics.com if you want to buy it and you can even pick your own colors.
