I think the standard foam pipe insulation is the best way to go. It might be argued that your idea of fiberglass wrap might indeed have a slightly better R factor, but I really don't think the actual $$ saving would be enough to really determine. For example, my recirculation and hot water supply pipes are insulated with the foam strips and I run my pump 24/7 and have for several years. If this increases my water heating bill, it isn't significant. I could put the pump on a timer, but there are times I want hot water late at night. I just love having it virtually instantly when I turn the hot water faucet on.