Jim,

I believe it's primary function is noise suppresion. I have an 84 300SD that had the same condition a couple of years ago. I covered the engine bay with an old blanket to keep the old crumbly foam from making a mess. If the underside of your hood isn't too filthy, you can brush off any loose dirt and use 3M contact adhesive. It's in a spray can. You can buy that buy that at any auto parts store. The hood insulation I ordered through a local import car place. Pretty cheap at $35. Sprayed the underside of the hood and the back of the foam insulation. I pretty much followed the application instructions on the can. If you happen to get a hood pad with square boxes on on side, that side faces the engine. The smooth back is where you spray the adhesive. Good Luck.

Nolan

84 300SD 278,300 miles
82 240D 261,000 miles