I have wrapped my headers with Thermo Tec exhaust wrap and it appears that they it is burning on the primary header just out of the heads, doing a lot of smoking and has turned black? Almost looks as though it is burning off? Is this normal and just part of the process?

I've used the bandage type an not seen that happen

I've used it before and this didn't happen. If its on a turbo motor the extra heat may do this.
What it did do though was turn the headers into junk, I think by keeping too much heat in the headers it fatigued the metal real quick. Just my opinion.

Where can you get the Bandage type from?

Just picked it up from a local auto parts store, I used 1" wide tape. Looks like it's stopped smoking now so that's taken the worried look off the faces of people walking past my stopped car!