A1998
My two cents...you've opened up your sills to put in a cat-back system and you don't like what you've seen. Repair the stock insulation, if you want, but...
even if you stay with stock header, stock cats and a good 3" cat-back system, you will want to address the sill heat issue past the repair.
I use the Roe Sill heat blankets. Here are the tips for installing this system, collected by me after receiving the insulation set and realizing there are no instructions. A quick call answered every question, but I'll save you the call:
1. You do not remove any of the original insulation that came with your car.
2. The blankets are placed along the whole length of the side sills, seam down. They will fit from "bend-to-bend." The insulation to original insulation fit may be tight, thats fine.
3. Apply the steel cable locks firmly, but not so much as to cut into the insulation.
4. It has been recommended to me not to alter your sill fronts, using sill "vents" as they let in a good deal of water and road dirt. Some do use these successfully, but try the insulation system without them first.
5. You do no need any additional drainage.
Good luck.