355 Is this the header insulation?

Probably.

Since you have the header in hand, can you see any of that fluff coming out of them ??

 

Using an air compressor, try blowing into every single duct of both headers and look if anything comes out, even just a white powder. But Imho the "darker side" of the engine is caused probably by bad exhaust gaskets there.

 

If you can smoke test the header, do so. The gaskets don't show an obvious break path, so there's likely a header crack to blacken the cylinder head like that.

 

How many miles do you have on the car?

 

Scrape the goop off the engine and see if there's fiberglass matting in it. The inside of the headers are basically stuffed with fiberglass. Based on the pic I am skeptical that's what you're seeing, but only one way to find out.

 

Kind of looks like it too me

 

Just spit balling a thought here. What about the catalysts? I know they fail and leave white residue inside the exhaust but I'm not sure it would travel up that far. Anyone have thoughts on that?

 

Headers usually don't crack because of something wrong upstream. But again, either your headers are cracked or they are not. It's a yes/no question, and it's probably worth the time it would take to find out the answer. You could smoke test them or use a cutoff wheel to remove the clamshell and visually inspect them.

 

As said earlier
Just smoke test them and replace with new
Sell old ones if smoke good or keep them
I have had tubi for 20 years and still good

 

Injestion of insulation fiberglass into the exhaust port ruins the liners, not the valve guides. If your compression (190 psi) and leak down (<10%) numbers are good, consider yourself lucky and toss those headers. Replacement headers need to have blankets or some kind of insulation or you will pay for it in the end.