Great first-hand experience guys! As you've discovered, recirculating spent, hot cooling air that's been further heated by the exhaust back into the fan and carbs is a major cause of overheating.
Rusty- So many guys (when building hot VW engines for their bug) ignore making sure all of the engine sheetmetal is installed correctly and then add a cooler, expecting it to cure the engine's woes. Yeah, oil temps are now under control, but the cylinders and heads are happily overheating themselves into oblivion and when they finally call it quits the only things saveable off the longblock are the valve covers and bails, distributor, and maybe the fuel pump and pushrods. You guys have found out why sealing the engine compartment from the exhaust is so important.
Mitch- some flat panel filters from K&N-
# 33-2238 - 5.188"x4.438" (23.02 sq.")x.625" thick
# YA-1602-U - 5.438"x4.3.3" (23.45 sq.") x.688" thick
# KA-0009 - 5.75" x5.25" (30.1 sq.") x.688" thick
There are others, but these are fairly compact and thin, I would think making them easy to install in the engine compartment sides, a little higher near the air cleaners, so they wouldn't disrupt the rest of the engine compartment airflow.
Driving at highway speeds (and higher!) creates 2lbs. or more air pressure underneath the car than over the top (this info from someone knowledgeable I trust on the Samba), and with the profile of our cars somewhat like a wing (relatively flat on the bottom, longer towards the front and dropping off quickly at the back) I'm not surprised that air is coming out of the engine grille and not going in. If all of the air coming into the engine compartment is coming from underneath/in front of the engine, bringing in enough to create slightly positive air pressure in the engine compartment at speed has the benefit of removing heat radiated from the engine itself.
Rusty- If you cut a 6" hole in the firewall in front of the fan intake you'll add 28 sq" of air intake. Oval the hole by 2-3" and you'll add 12-18 more sq." Remember, a bug has all that air intake above the engine in the bodywork below the rear window. Because of the shape of our cars, we need to add way more intake to compensate for all the air being pulled out through the grille. The more air there is, the less the fan and carbs have to fight for air at highway speeds.