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I am considering to improve the efficiency of an existing installation where heat pipes between house and hot water deposit have been insulated with a thin (10mm) neoprene sleeve and directly buried?

Wiew of the actual installation

I measured the temperature drop between the water tank output and house's heated floor distribution point. With a water flow of nearly 1L per minute, it reads 50C in and 45C out, and I calculated it to be roughly 350 Watts loss per hour.

What would be good and cost saving approaches?

Do a completely new installation enclosed in PVC pipes?

Clean this mess up, cut the pipes, wrap it in new neoprene sleeves?

  • Where is this? Unless the heat loss is causing the house to be too cold for comfort, leave it be. It would be so much trouble/expense to redo this that you will not recover the expense to do it. Just accept that it is not as well insulated as you would like, and try to save energy in other ways. – Jim Stewart Mar 29 '17 at 9:11
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A fairly common approach these days is to make a box from rigid polystyrene (12-25mm thick) and fill it with closed-cell spray foam (polyurethane.) Don't forget to separate the pipes with more insulation - in many of these systems the double-pipe run is too closely connected and acts as a heat exchanger - not only does the hot supply drop in temperature, the cold return rises in temperature from house to heat-source.

That heat is not technically lost, but it's also not useful/available for heating the house. But you might want to measure it and see how much you are really losing, if that changes your mind about digging up the whole pipe run.

This foam box and spray foam approach does not require cutting the pipes, nor doing a completely new installation - just digging for access.

The box, in cross-section, would look like an "E" laid down flat - you put one pipe in each channel and fill the rest of the channel with spray foam - most people put a foam lid on the box ("E|") after applying the spray foam, and then backfill.

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