Honestly this type of rack isn't going to work for you. You need a enclosed rack like the ones sold by animal plastics & reptile basics. Even with these racks you are still going to have a hard time keeping the temperatures right.

To answer you questions:

Yes you can use flexwatt, as long as it is regulated by a thermostat you will not have any issues.

Something to cover the grated parts would be a good idea

Foam board insulation will help hold the heat in but this is a battle that you aren't going to win easily.