Thanks guys! I am using stainless steel .020 aircraft safety wire. I used a lot of heat last night and it cut much better. I still am getting fine hairs, so I think my temp is just about right.
I couldn't crank up the tension enough because my inline spring is too weak so I still got some degree of wire drag. Funnily I cannot budge the spring by hand, so the tension is up there already. I have a guitar right next to the power supply and the twang from the cutting wire is actually pretty low compared to the guitar, so I think I need more tension.
Luckily I have a more heavy duty spring that I can install tonight. More trials to come! At $10 for a 2" x 4' x 10' pink foam sheet this foam cutting is cheap, but not so cheap that each core I throw away doesn't make me think I'll be soon making another bunch of $10 trips to Home Depot.
