We used a grey foam material and used the outline of the heater box openings as a template. This was not an exotic type of material, as the environment is not all that nasty. It is a pain in the butt (and various other body joints and pieces) to do this. I have attached a photo of the heater box with the foam glued in place.
The process for removal and refit is quite good, but also quite a labor. My friend and I did this on his car and on mine. I highly recommend taking the seats and steering wheel out (not a big deal at all) it gives you much more maneuvering room. The 280 SL is a bit more difficult, as the dash is now a one piece set-up. You have to work through the radio cut out.
And yes, this is the very epitome of "we have this great little heater core, we should build a car around it...."