correct me if im wrong though CATS work when they are up to a certain temp, and will also retain a lot of heat, Hence when temp tested if its cooler or same as the rest of the system then its obvious there is nothing there,
When I got EPA tested for noise he did check the CAT was in the correct place, Not sure if you would be allowed to go putting them were ever you like, What would insulating the exhaust do ahead of the cat?