I honestly don't think the insulation on the outside had an effect on the hot spot. I think it has more to do with the heat coming around the edges of the water pan. Your idea of a diffusior to mix the hot air together before it gets up in the smoker.... right over the water pan.... I think is the best solution. It's really not a big problem.. I could move the meat around a little sometime during the smoke and probably eliminate most of it.... but what fun would that be.