Think of an incubator like a bucket with a hole in it and you trying to keep the water level by adding full dippers of water one at a time to it.
The size of the hole in the bottom of the bucket is like the heat loss from the incubator.
The level of water in the bucket translates to the temperature in the incubator.
The size of container you use to scoop water into the bucket equates to the wattage of bulbs or heat elements in the incubator.
The water that goes through the bucket is the electricity going into the incubator.
How often you need to add a scoop of water to the bucket represents how fast the thermostat, heat element or bulb cycles.
It is far easier to keep a constant water level in a bucket with smaller hole using a small dipper to refill.
Sure you can have a 2 inch hole in the bucket and fill it with a 1 gal can but the level is going to be much harder to control and a lot more water passes which is just senseless waste of energy in terms of the uninsulated incubator. Problem too is if you stop scooping water into a bucket with a 2 inch hole it empties very quickly which equates to cold eggs faster when the power goes out in an un insulated incubator.
Yes you do need ventilation in an incubator, but the hole you need is not huge and the air flow through it rather insignificant as far as heat loss. Keeping in mind that the heat lost in the incubator is not just through convection out the vent hole but also through radaited and conducted heat energy. The walls of an un-insulated incubator will cool the space inside more than an insulated wall this can lead to any eggs near the incubator walls being cooler than the ones more in the center of the incubator.
Wood is an ok insulator, 3/4 inch soft wood wall will give an R-value of about 1, one inch of white styrofoam will give about 4-5 times the insulation. 1.5 inch foil covered foam board will provide about 10 times the insulation.
To take the analogy further, the splash caused by filling either very quickly with a small scoop or with a big scoop equates to temperature overshoot.
The size of the bucket equates to the size of the incubator, the smaller the bucket is the quicker things change, same goes for an incubator.
The water level in a tall skinny bucket will change more with each scoop than a wide shallow bucket and it is easier to spill water trying to fill a tall skinny bucket. (remember water level = temperature) A wide shallow bucket is essentially the same idea as adding thermo-mass in the incubator as thermo mass will work to reduce or absorb temperature fluctuations in the incubator each time heat is added.
IMHO
Insulation and termo-mass are cheap, they reduce waste energy and set up the right conditions for precise temperature control. As humidity is linked to temperature, insulation and mass help on that front as well, not to mention they buy you some extra time in case of power failure. If there is room to fit in some insulation and mass go for it, I can't think of a down side to either other than that the incubator will take a little longer to get to operating temperature if there is lots of added mass.
