Images of Endeavour's Damaged Tiles
That's absolutely correct. It's not thermal. If you look at the article or go to the source images on Neptec's site (and caption info), you'll notice it says it's a false-color depth image, meaning the color indicates it's depth below the surface according to the scale on the side. The damage is about 1.2 inches deep and a little bigger than your thumb in diameter.
This isn't really an issue of insulation. It's the disturbance of laminar flow. The laminar boundary layer is actually quite a good insulator itself, especially at Mach 20. The main issue is how much the hole disturbs the boundary layer and what localized heating might result. This small of a hole in diameter, even though it's mostly through the tile, should be mostly negligible. But NASA is treating it VERY seriously and is doing simulations as well as has an arc-jet facility to test on an exact duplicate of the damage. (It's a 3D model of the hole, if you check the video, and is easily reproduced on the ground. It has even been printed out with a 3D printer.)
Remember that Columbia damage was on the Reinforced Carbon-Carbon (RCC) panels on the leading edge of the wing, not the tiles on the belly. The leading edge is one of the hottest and most critical points where that damage occurred. This damage is generally low risk, and EVA is always risky to some degree, but this might be a great opportunity to test repair procedures. When people talk about whether NASA is making decisions based on schedule for this damage, it's not about ignoring risks for the sake of schedule. Risk wins, easily. The schedule issue is that if the damage is not a risk at all, is it prudent to fix it anyway to test procedures and have an actual flow repair to analyze upon return. Remember, EVA and extending flights adds risk to the crew too, but can be beneficial and reduce risk both for this flight and future flights.