The insulation for solid rocket motors provides two critical services:

1. Keep from melting your rocket casing, but even more important...
2. Keep from igniting your propellant outside of the intended burn area.

Two of the most common causes of solid rocket motor failure are insulation failures (leading to unintended ignition, resulting in overpressure) and propellant cracks (also leading to overpressure due to higher than anticipated burn rates).

Solid rocket motor design is not for the faint hearted. In addition to aspects like casing and nozzle design, you have to consider the geometry of the propellant. A simple end burn design will have a steady thrust throughout the entire burn, but if you need a higher initial thrust level to help with takeoff, then you need to bore out at least part of the propellant. There are many different geometries for this, and each have different thrust curve characteristics.

And Tom, a failed 12" diamter rocket wouldn't be a grenade. It'd be a big assed fragmentation BOMB!