Ladies and gents, I am a corrosion engineer by profession, and this is absolutely true. We see this type of corrosion all the time on above ground pipes that have been insulated around plants and compressor stations. Moisture accumulates and condenses under the wrap and sets up the ideal corrosion cell. Failure in some cases is quite rapid.I truly hate beeing the prty pooper, the idea is great no doubt about that but I have to say that what you are doing to the lines is lethal in the long run. The material that was used looks rather spongy and absorbant. Also in general if moisture gets underneath this material it will rust and corrode the lines especially in areas like here in canada with the tonnes of salt they put on the roads
Given the heating/cooling effect in the engine compartment, I wouldn't take my chances wrapping stuff like this without giving the lines a good coating of something like high heat epoxy, and even then I'd be very skeptical.