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In my old house I had some styrofoam board behind the fridge. I don't think it's that much of a fire hazard. It's not readily ignitable like gasoline.
For the cotton insulation, can you placed it in a larger freezer bag to keep it clean?
I saw a solar decathlon show a couple years ago and the competitors were really worried about door opening time. They made a list of what they wanted to get out of the fridge, then quickly opened it, grabbed the food, and slammed the door. I don't get that crazy, but I do try to minimize door open time.
My current fridge has the coil under it towards the rear by the compressor. A small fan draws air through a vent in the toe kick, blows it over the coil, then exhausts it back out the front. I'm sure this is not optimum as the cooler intake air is mixing with the warm exhaust air. There must be a better way to do this. This is an energy star fridge, though. If your fridge is designed like this, you should be able to add insulation to the sides, back and top without affecting its operation.
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