The insulation is there to serve two purposes:
1) The insulation makes the volume 'seem' larger to the driver, with all the advantages that entails.
2) The insulation damps out resonances and thus smooths out the response of the sub.
Whether you need it or not is highly dependent upon the size of your sub. Small subs may benefit from the volume-adding effect, but won't need the resonance damping as much. Large subs won't need the additional volume, but can suffer from nasty resonances.
As for you, I'd only put insulation at the endcap opposite the driver, to damp out resonances from that flat surface (round surfaces aren't nearly so bad, part of the advantages for the sonosub). If you want more than that, you are free to do so, but it wouldn't be necessary.