Let me explain it's layout.
The home has cathedral ceilings except over the master bedroom's closet and bathroom and utility room/wash room (which the furnace is in). This is one end of one section of the the home. Where the unit is mounted in the wall, behind it is the closet for the master bedroom. Beside it is the water heater (accessed through the Master bedroom's closet). The closet is always hot with no air vents.
Here is a basic diagram of how it's layed out:
![Image](http://home.comcast.net/~jsavga//ac/HouseLayout.jpg)
The walled areas around the furnace/AC are always hot (the cabinets, closet, water heater, etc.
My question is would it be ok to insulate around the two sides of the furnace? I know not to insulate around the top without special insulation, but what about along the sides of the case where it mounts in the wall?