I just took mine out. I am in the camp that this things only purpose is to reduce noise. A number of people seem to believe that it is to keep heat from damaging the paint but based on the number of vehicles I have owned that did not have such insulation I do not think it is an issue, one of which was a 6.0 powerstroke diesel and on those the turbo is even closer to the hood than on the TDI and it never had paint issues. In my opinion take it out and never worry about it again.
I had a bunch of these left over from my recent wood floor project, and they worked like a charm:
They're cheap (well free for me anyway ), small & black (so they don't stand out) and tapered w/ little ridges so they wedge in and stay put. I'll try to take an actual photo and post it up (if I remember), but they worked great I think. You can find them at HomeDepot or any flooring store for about $5 a pack.