Hi jharding08;
Welcome to the forum.
I did the the dual element upgrade on my Old Bradley Original. When I removed the back panel the insulation was pretty much burned off for the length of the element, and about three inches above and below. If you look closer you will see what looks like to be a small patch of mineral wool insulation on the wall (it could be fiberglass), that is meant to absorb heat directly behind the element.
If your back panel is getting real hot, then I'm sure that may cause further damage to the foam insulation. Adding fiberglass insulation would be alright for temps under 300°F, but mineral wool would be a better choice - if you can find it.
Moving the heater further from the surface may work, but make sure it is not too close to the drip pan and water bowl, where it may potentially cause a flare-up.
If you upgrade the wiring make sure you get high temperature wire, which the wire insulation can withstand the temperature.
A heatshield is also a good idea, but I don't have any idea of how to go about that or what material to use.