Exhaust wrap is known to cause corrosion on car exhaust systems (which are generally not made from materials like stainless steel). Header companies will void the warranty if you use the stuff. Someone else will have to chime in as to what bikes generally use (as I have no idea)...if bike systems are stainless steel, or some other corrosion resistant material, you should be fine using it...but otherwise I would recommend against it. It does, however, work really well at insulating the exhaust.
As for the heat shield idea...aluminum foil. Note: heat transfer nerdiness coming out now~
What you are feeling off your exhaust is heat radiation. This is the stuff that heats the earth from the sun. All materials have properties which affect how well radiation is absorbed or emitted (or if the stuff passes through). Now to the part you care about
: aluminum foil will repel approximately 97% of the radiation that hits it. It will also only emit about 3% of the heat it contains. So, if you can figure out how to mount it so it doesn't tear and so it sits between you and the exhaust...you'll eliminate virtually all of that heat coming through. Other option, which would be quite a bit more sturdy, is a polished piece of aluminum sheet.
Beyond that though...I'm with Lawn Masters...don't wear shorts while on a bike. Just think about crawling across the pavement as fast as you can...then imagine going about 10 times faster.
