Do i still need the insulation in an old ceiling light if I'm no longer using incandescent bulbs?
As long as it's possible to screw an incandescent in there, someone will.  So the insulation must stay, otherwise you are using the product inconsistent with its labeling or instructions, voiding its UL listing by altering it, all of which is a codevio.

The CFLs overheated because they were in a confined closed fixture, the insulation had nothing to do with it.  Been there, done that.  The root problem is you were using CFLs somewhere they should not be used, such as 2017. 

That is your basic "tenant grade cheapie" fixture, and if you're absolutely in mad love with it, I would look for some ~8 watt LED screw-ins to put in there, might still have overheating problems though. 

If money is no object, get a nice soldered-in-LEDs fixture where the LEDs and their heat sink are integral to the fixture, and which aims the LED light properly.  Almost everyone wants a cone of light, and fixtures try to give it to you with inefficient reflectors.   LED screw-ins don't avoid that, they corncob them around to try to light a sphere.  But purpose built fixtures can be aimed or even lensed.