It's not uncommon to see a lovely model steam boat spoiled by messy boiler lagging. If you can get your hands on a set of wad punches (I bought mine on ebay for £20) it's quite easy.
On this MH&B boiler I decided to do it with Kaowool underneath, making it a little more tricky, but better insulated.
First measure and mark the size and position of the holes that you will need for the fittings/dome/chimney on a piece of paper.
If the funnel is 20mm, draw a hole that is 21mm to make fitting easier later.
Sand the lagging strips on all sides and slightly mitre their edges inwards so that they will follow the curve of the barrel.
Varnish all faces. Cut the lagging strips to a little over required length, and using double sided sticky tape, make a panel wide enough to accommodate the various holes.
Make sure that the lagging strips are wide face down. Transfer the markings for the holes from the paper to the panel. Make two other lagging panels for each side of the boiler.

Using the wad punch on a piece of scrap wood, punch the holes in the panel of lagging. If the holes are a little too small it is very easy to make them larger by wrapping a piece of sandpaper around tube/bar of similar dimension and rotating inside the hole.
This technique can also be used to sharpen up the holes if the wad punch has dented the wood.

Use the drawing and wad punches again to cut the holes in the Kaowool. It is a good idea to stain the edges of the Kaowool black for a tidier end result.
A permanent marker will do. Wrap the Kaowool around the boiler and fix underneath with masking tape.


Trim the end edges of all three panels to the correct length using a straight edge and a craft knife.

To get the correct curvature of the top panel: With the backing still on, place a strip of double sided tape along the side of the boiler, and then carefully lay the panel on to the sticky side.
The holes are blocked with tape now, so cut the holes for the fittings etc through the tape with a craft knife. The old tape on the outside can be peeled of now.

Trim off the excess tape and then cut the panel in two down the center line of the fittings, cutting between two lagging strips.
Peel off the backing and carefully place the two pieces around the fittings and press down on to the Kaowool to stick in place.
Repeat this process for the two side panels. I stuck tape directly on to the Kaowool, and then butting the side panel up against the top panel first, attached it to the curve of the boiler.
Attach boiler bands.

