I believe that's what I used in the Navy
many moons ago. Mixed with water
and we used our hands to work it in the coverings on the steam pipes. Work great too. I don't see that lapping compound on the fibers on this cloth though. The cloth is woven and it looks like a resin fiber, maybe asbestos, I don't know. I don't think it would absorb paint though but it must because the paint or whatever is on it doesn't come off be is worn/faded effect. The fibers looks to be a pinkish color in the raw - perhaps fiberglass
matting?? It definitely doesn't have a heavy lagging coating to it... I remember lagging to get hard and paintable (but its been 43 years since I did lagging) My engine
cloth is still fairly soft compare to lagging..
I think I will try to get in contact with Sam's Marine Parts
who deal with Hatteras for a parts
outlet and have some factory retirees who worked at Hatteras. It will be my last resort I guess. Thanks to all you guys for your input, I appreciate your help!