Why is the outside of my chest freezer always dripping?

Your summation is probably correct the insulation is starting to fail.
Failing insulation is generally restricted to specific panels, or areas within the panel. Its as well to check the temperature inside the freezer, as if it is too cold then this will increase the condensation in damp conditions. Assuming the freezer is cycling correctly and the temperature normal the insulation is probably faulty. Whilst it can be repaired (in some cases) it is generally not considered economical.

Chris_Y
December 2004