Keep in mind that you need to allow air into the furnace closet for combustion of the furnace and water heater. But, if i were going to insulate the furnace door and surrounding walls of the closet, id use 2" thick dense pink styrofoam board available at Home DePot keeping it at least 2" away from the furnace/flue pipes. You can buy a big sheet of this and its cheap. I used this to make a partition in my workvan so i didnt hear my tools making noises in the back --- it is very effective as a sound barrier as well as an insulator.