No you do not need to electrically isolate the tip of the thermocouple and as you mention you will get a faster response time by leaving it exposed. I would also suggest getting some thermal paste and put enough on the tip of the thermocouple to guarantee that the thermocouple tip has good contact with the end of the thermal well. You don't need to fill the whole thermal well with it, just enough to get contact. Thermal paste will reduce you response time and improve accurate measurements. I consider thermal paste a must for a thermal well/probe.