The heat exchangers on my '74 2.0L are just flaking away and I noticed a wire mesh with a white substance spread into the mesh as part of the exchanger. Anybody know what this material is?? Not asbestos, I hope!

I have no clue what that is, I think mine are hollow, but I have the 1.7/1.8 Stainless HE's

That sounds like a repair to me. There are a few muffler repair kits that are comprised of a mesh and a paste. I doubt it has asbestos, but who knows.

now the fiber seals on the heater boxes (flapper things ) are actually asbestos, but as long as you dont eat it or scatch it with a knife and breathe the dust, you should be fine