Should I insulate the headers?
Insulating the headers has many benefits. Aside from keeping the engine bay cooler and keeping your plug wires from frying, the efficiency of the headers themselves will be slightly enhanced if the exhaust is not allowed to cool until well down the pipe. Hot exhaust gases will travel faster in a hotter pipe. This can add horsepower due to a slight increase in exhaust scavenging. The oxygen sensor may even burn cleaner due to the elevated temps, which might shows to the computer a leaner burn, thus it will increase the fuel flow (a tad richer mixture may net more power). . The cats will also heat up faster for quicker emissions control.
Ceramic coatings: Ceramics are exceptional thermal insulators. Just send your headers to a specialty shop like Polydyn or Jet Hot, pay the bill, and install! When they receive the headers they blast the inside and exterior surface to relieve its pores. Then a base coat of a ceramic material is bonded by a dipping and then extreme heat baking process. Coatings can be sprayed or dipped. The inside of the pipes are treated with a thermal barrier coating. Most people have the coatings on the outside of the pipe as well, which his does little for further insulating, as the interior coating does such a great job at this. However, the exterior coating adds an impervious surface that maintains beauty. Many people have the heat shield over the headers, to further reduce underhood heat and protect the plug wires.
With stainless piping, the thermal barrier must be only on the inside, due to concerns of thermal fatigue cracks developing.
Asbestos wraps: Well, aside from being absolutely a pain in the *$% to get "Just Perfect", they eventually deteriorate. They help insulate, but are unsightly, and a shorter-term fix . Wrappings have a tendency to trap in moisture (condensation built-up) thus have the potential for initiating corrosion. They are, however, a good guard for plug wires and hoses. The metal fastener clips are a pain in the fingers. Oh, and this is a significantly cheaper approach than cermaic coatings.