A comprehensive diesel engine system model, representing in detail engine heat transfer processes, has been applied to a study of insulated diesel engines. The study involved a broad design analysis matrix covering a range of engine configurations with and without inter-cooling and exhaust heat recovery devices, three operating conditions and seven heat rejection packages. The main findig of this study is that the retained heat conversion efficiency (RHCE), of the in-cylinder heat retained by insulation to piston work, is 35-40 percent; these levels of RHCE are larger than those predicted by previous models. This means that a significant part of the retained heat is converted directly to piston work rather than being merely available in the exhaust stream, from which it would be recoverable with a much lower efficiency. A practical zirconia-insulated turbocharged and intercooled highway truck engine was found to have a 5.1 percent higher thermal efficiency than a cooled baseline at rated conditions.