Can I use free denim insulation that got wet outdoors?
Is it safe for my health to use?
Probably healthier than some options. It's a natural cotton fiber and if made AS insulation (as opposed to someone just shredding old jeans), it is treated with boric acid (Borax) as a mold and pest repellent as well as making it flame retardant.
Is there any cleaning I should do prior to using it?
No, absolutely not! It takes a LONG time to dry out if it gets wet.
Is denim insulation washable?
Again, NO!
Is it significantly less effective due to its age?
Probably not, but we don't know it's age. Cotton fibers do break down.