You can cut it with regular paper scissors, provided they are long enough to get a bite on the thickness of insulation you are using (1" thick needs bigger scissors than 1/2", obviously) They need to be sharp-ish, but they will not stay that way long! Ceramic insulation is much more blunting than cutting the sort of glass fibre insulation batting used in houses. Wear gloves! It is a lot more likely to leave you prickled than modern house insulation.
As an example of what is possible with a small forge, this is a great page:
https://ronreil.abana.org/minifor1.shtml
There are a lot of discussion boards dedicated to metal workers where they discuss forge construction. I bet there is good info on Iforgeiron, Blade Forums and Don Fogg's forum.
There is a safety issue with ceramic insulation. After you construct the forge, you should give all the exposed ceramic wool surfaces a good soak with a rigidizer solution, then fire it to set it. This solution is little more than colloidal silica and water, mixed to a watery-milk consistency. The purpose is to prevent ceramic fibres from getting blown into the air by the combustion gasses. They may not be asbestos, but you do not want to be breathing them in either! It also makes the forge more robust.
I also strongly recommend using a fire brick for the base, if you are putting things in and out, unless you have them suspended up in the centre of the forge, supported on a rest outside of the forge, they are going to drag across the bottom of the forge at some point and Kaowool is going to get shredded in short order.
Chris