Oh Gosh, that will work just fine.
Wood chips are just a slightly bigger derivative of sawdust and that is what they used to cover ice so that it did not melt here in New England forever. it is not only insulation, it is excellent insulation. As the others have said, no need to build a "fence", just
berm the outside with solid wood chips instead of wood chips/compost and you will be fine.
As for the plumbing, compost heat does not get past the boiling point, so you need a very meager amount of supplies. In fact you will not need pressure relief valves because it is doubtful you will be using a closed loop pressure system. Just keep a bung open on the drums and at worst, it would boil over; again super doubtful using compost heat.
I think you are on the right track, just remember to keep it simple.