If there is no internal drum brake then the winch will not heat up so you could use the nylon sheathing as a line protector.
-Alex
Either way the sheathing isn't necessary, so long as you aren't winching out under power for long distances. If you pull your rope out by hand, your brake shouldn't be creating any heat.
Also, does the nylon sheathing really reduce temperatures any? The 1/6" of insulation it provides seems like it would transmit the temperatures to the core line pretty quickly. Have you guys put a thermocouple in the line to see? It would be an interesting study.
Regarding the line pulling down through the resting layers, that always seems to happen to some extent with my lines, no matter the initial wrap tension on the line. It doesn't seem to be a problem though... it just puts a temporary kink in the lines that get flattened. I'll just pull the line out fully, work the kink by hand, then re-spool it.