...insulation on the long cooling hose.........
I just have to jump in on this one.  The insulation on the 'hot' cooling
line going forward from the engine to the radiator (and front heater)
may help in cold weather, but you are interfering with what may be a
critical portion of the cooling system.  The engine cooling system in
the Wasserboxer is marginal enough (seems to have just enough heat
transfer capability to keep up with the engine) without eliminating a
lot of surface area that is doing at least part of the cooling.  You may
well find yourself pulling the insulation off when you start driving in
hot weather.
I think you are dealing with some other problem.  My old '85, when the
system was finally fixed (new radiator) and now my '90 (larger cooling
lines) both will burn you out, even in cold weather.  And the heater
response is virtually instantaneous in my '90.  I think you have some
kind of a problem with the heater valve itself, or restricted flow
through the heater core.