Its a safety thing that the sanctioning bodies require if your racing. Not necessary on a streeter. It also gives you a little baffling effect, so you don't get major fuel slosh when you go around corners. If you have a big cell I guess that could be a problem. I have a friend who took the foam out. He then put perforated pcv pipe inside and tied them together in bundles leaving a hole for his gauge. Kept the baffeling effect and could still run a gauge. That was a couple of years ago and its still working.
I had an old one I ran in my last roadster and had a big problem with it clogging up my fuel filter because it was deteriorating and was a bitch to clean out.
on a fuel cell i got from summit racing, i just trimmed the foam away from where i needed room. i got one of the dark grey/black plastic fuel cell. I needed to drill a hole for the sender, so i did, and obviously there was foam there. i took the filler cap ring off, and was able to remove the pieces to get to the one i needed and just trimmed it with a razor knife. the pieces in mine were just like 3"x3" and then the height of the tank.
If the foam is preventing you from installing the fuel gauge sender, trim away what is necessary for you to do the installation, but don't remove all of the foam from the tank. It's in there for a couple of reasons, it prevents the fuel from sloshing back and forth which can help to prevent / eliminate fuel starvation. More importantly, if it's what I think it is, it is also a fire retardant. One of the many things that the racing community adopted from the aircraft industry, it's common in high performance fighter type aircraft. Shoe
I've always wondered about that foam. I've got a turbo dodge omni that leans out in turns if the tank is down to a 1/4th or less. Maybe thats my fix.
The aftermarket has a tube-type sender that works with GM/aftermarket gauges that will work without cutting the foam. Cutting the foam will probably make it deteriorate quicker. I believe there is a coating on the outside to slow the process... at least with RCI foam.
Do you guys know of a tube type sender for a pre 65 GM gauge (0-33 ohm)? I'd really like to run the stock gauge in my chevy II, but for now I just have a 2" autometer (0-90 ohm) bolted to the bottom of the dash.