I shall try some heat on it if we get a dry day soon
. I'm guessing I need to remove all of the stuff that is discoloured?
The really 'wet' parts I'm managed to dig out by hand mostly, but after a few hours, you can see black liquid just seeping out of the adjacent (and presumed dry/solid) bits, hence why I think I may have to remove it all 
Until I can, I guess do what a precious owner had done - lay a load of newspaper over it, and refit carpet.... ....out of site, out of mind
. Is there any way of temporarily masking/removing the smell - oopen the boot and there is a whif of fresh diesel?
I'm sure you'll get plenty of suggestions...

If its the kind of quantity I'm imagining , I think you need to go the heat/meachical removal (scraper/wooden spoon) way to start with.
Then try solvents on a small bit to start with and see what disolves it.
I'd start with mild solvent and progressively get more aggressive, but wear gloves and be careful if space is confined (like a car boot for example

).
eg
water
washing up liquid
meths
white spirit/turps
paint brush cleaner?
petrol
paraffin
diesel
cellulose thinners (nail varnish remover - but I think you would need a catering pack...)
Must have been something pretty agreesive to attack the insulation - I wouldn't think petrol or diesel would do it.. (I have a colleague who took a car battery to the tip. Put it on the back seat. You can imagine the rest..

£1000 insurance claim)