Take it from some one who has actually lagged a boiler with teak it wont burst in to flames, it just changes colour as the wood dries , but will stain a bit , there are Prob more vapourse in the adhesives that we use and they are not a problem , most good steam loco suppliers such as Polly / Bruce eng or Maidston eng sell the material it is not dear and easy to use the 1/8 is what MHB uses and they normally use thin doublesided tape, the stuff without padding to hold it just a thin strip at each end untill plank over the top or put a brass wraper as in the Der sea Cadet, the tape will become useless the first time you fire and its just to hold the blanket while you plank,
Proteus