I don't see holes bored in insulating materials covered anywhere so he must stay 1 1/4" from the edge of the top plate ( framing member). The code (handbook)doesn't show this particular situation but examples are given of staying 1 1/4" from the edge of a furring strip.
The code refers to holes bored in framing members and insulation is not a framing member. It also refers to running exposed and staying 1 1/4 from the edge of the framinmg member.
When we have to start putting nail guards on styrofoam that will be the days I give up. We punch holes in the sheathing all the time with no guards. Only the proximity to the top plate would make the nail guard necessary if at all.
Huh?