You got it right that the "proper" repair is to remove the collector plate by spreading the frame. I've done it and it isn't too bad with the right tools (see my first foray into collector replacement: https://ogrforum.ogaugerr.com/...or-board-replacement).
If that isn't your cup of tea and the insulation is your only problem, you can disconnect the wire up top and then take some heat shrink insulation and snake it down over the wire as it meanders to the collector plate.
Olsen's kindly hosts some compiled information on the 262 as well as supplies parts:
More pages to follow: http://www.olsenstoy.com/searchcd31.htm?itm=782
