I'll add my two cents, perhaps a little late . . . .
I have done this sort of thing with many kayaks and other boats. And, I advocate it for my builders.

In no particular order:
It should be considered supplemental floatation - sort of 'always there' insurance - and is not a substitute for air bags in a SOF kayak. As noted, the open nature of these hulls allows them to take on a whole lot of water, and a bit of foam in the ends isn't going to do much about that.

Yost style non-traditional SOF construction, with plywood frames, does often leave completely inaccessible compartments at the bow and stern. In some designs, no pulley system or even a push stick can get anything to them, and I have tried mightily.

The foam should be glued to itself, forming blocks. Epoxy works great, though they do make specific foam adhesives. You can tack the blocks to the frame to keep them from wiggling about, but the size of the block of foam itself keeps it in position. It should be cut so that it isn't pushing against the skin, of course. Air is more or less free to flow around it, and water is more or less free to drain.

Some foams absorb water readily. Some are much more resistant. White Styrofoam often used for packing, and even used for floating docks, is a poor choice, as it does indeed absorb water and crumbles easily. I typically use foam board meant for home insulation - it is tough and does not absorb water particularly quickly. I've seen it sold in pink, blue and green, and is commonly carried at stores such as Home Depot or Lowes. Score it with a razor knife and snap it, rather than sawing it and creating tons of foam sprinkles.

As I mentioned, the foam can be/should be installed so that water and air can flow around it, but of course these areas will remain damper longer than the rest of the boat. Still, this has rarely - in my experience - been an issue with the way most people use their boats: A few hours or days at a time, followed by days or weeks of dry storage. [Of course, if one lives in a rainforest, and the Olympic Peninsula (USA) comes to mind, then dry storage may not be so dry . . . .]
Your usage may vary.

Hope this helps -
Dave Gentry

www.GentryCustomBoats.com