I think they should replace the looms regardless of whether they are losing their insulation. Because if they aren't now, they will in the future.
As I've mentioned in the past, there are two types of insulation used on "primary wire", PVC and crosslinked polyethylene.
PVC is only rated for temperatures up to 176F. It is easy to see why PVC would not be a good idea for under-hood applications, given this temperature rating.
Crosslinked polyethylene is rated for temperatures up to 257F. This temperature rating is far more suitable for under-hood use.
I went to a u-pull-it yard and pulled a wiring harness off of a '95 Contour with the Zetec. The harness looked to be in good shape, the wiring is not stiff and it is not cracking. I initially thought the harness had been replaced under the recall.
I decided to apply a soldering iron to one of the wires on it. The soldering iron melted right through the insulation, which is characteristic of PVC insulated wire. Had that wiring harness been in use long enough it would have started cracking. I guarantee it.
I applied the same soldering iron to one of the wires on a harness from an '89 Mustang I have laying around. The insulation did not melt (despite holding the soldering iron against the wire for far longer than I left it on the Contour harness), meaning that the Mustang harness is insulated with crosslinked polyethylene. That harness would never start cracking, because the insulation can handle the heat.
Brian