What type of insulation can I use to insulate around my furnace exhaust?
"Rockwool" or mineral fiber - looks sort of like fiberglass, but good for higher temperatures - most fiberglass is coated with a plastic product that smokes off (helps to bind the glass into a batt) otherwise I think fiberglass would be as effective, but given that (the plastic stuff smokes off) rockwool is the material of choice where you need high-heat resistance.

If the gap is very regular, there is a fiberglass product that would take the heat - stove gasketing - a rope-like product available in several sizes.