I tore out the insulation near the belt because it was touching it. Do I need to replace that old insulation?

Thanks Jim! But this is actually in the engine compartment on the right side where the flywheel is. Help!

Also mostly for heat and not critical to replace. Engine placement dictated added insulation to keep heat and noise out of the passenger area. If the noise or heat bothers you, replace it. otherwise, you should be fine with what you have done.