[old jupiter]

Reducing the heat-loss and keeping more energy in the exhaust gases is generally said to improve scavenging (gets the exhaust out of the pipe better) and maybe reduce back-pressure (reduces dilution of intake charge, even may assist cylinder filling for more volumetric efficiency). In a closed engine compartment, wrapping the exhaust can mean the intake manifold and therefore the intake charge aren't heated as much, which is likely to help power, and could be either bad, good, or indifferent for fuel economy.

I'm merely guessing now, but I doubt that wrapping a header pipe from engine to cat will cause the cat to overheat, and it should cause the cat to light sooner, which is good for emissions. Someone else here might know this.