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I think it is a thin plastic foam similar to foam which is used in headphones.

hrmm, never seen it before but I don't forsee it being very good.

I think adding foam to the inside of a PC may cause dust to stick to the foam which may cause overheating problems in the future.

Agreed, sounds like something that would just back fire and create more issues for the PC.

I think the foam may attract bugs as well.

also read stories of people buying used parts only to be really infected by bugs

I heard used computers sometimes contain bus as well.

But, I think new computer parts may contain bugs as well if the computer parts factory has a lot of bus living in the factory or the wokers have bugs on their clothing or body.