<span style="color: rgb(255, 0, 0);">It is warm enough for me to keep my hands there for about a 45 seconds
to a minute or so. However it was hot enough to make the </span>
<span style="color: rgb(255, 0, 0);">fiberglass</span><span style="color: rgb(255, 0, 0);"> little bit softer then normal when it is not running.</span>
Not sure what a single wall bi-pipe is exactly but if the fiberglass is soft that is definitely too hot!!
Is it a single wall pipe or a double wall pipe? The steps you take to fix this problem will likely be different for the two types of pipes. Getting air to move out of the fuse might be different for single wall pipe depending on a number of factors; whether you are running an enclosed bypass or open bypass, whether the pipe is attached directly to the bypass or are you using a bell mouth (as mentioned by Lewis), etc. I have found that in most cases adding more insulation is more of a band-aid than a fix.
When you are sure you have the engine to pipe gap right like Lewis indicated then try the following;
There is probably a former at the rear of the fuselage that centers the pipe. On both of my Aviation design airframes these are solid. If yours is the same then you can drill holes in the former around the diameter of the pipe to allow air to bypass and flow around the pipe and out of the back of the fuselage. The other thing you can try is to make sure the pipe sits inside the rear of the fuselage about 1/4" and this will create a vaccuum effect around the pipe to pull more air out of the fuselage.
Let us know if you are running a single or double wall pipe.
Gary