I've recently been cutting sheets of Celotex insulation for the deck of my layout. The knife I used was an old Sabatier style cook's knife, re-sharpened for the job in hand. Cutting along the length of a sheet, knife at a low angle, using a steel straight edge as a guide, it cut through easily with minimal dust and kept a smooth edge . With a thick sheet you may need two or more cuts to go right through, but any waste generated tends to be in sliver form. Provided you don't use the knife too vertically, it shouldn't snag causing a lump of insulation to come out. Keeping the blade sharp also helps. The Stanley shapers (Surforms), mentioned above, are still available and will remove material quite quickly. A good coat of neat pva will help to seal the foam edges, ready for plaster bandage, polyfilla or other detailing medium.
Andy