I think that closed-cell foam should be OK.
Open-cell foam attracts moisture and retains it, which isn't good for metal, not even "stainless" steel.
Closed-cell foam has open cells only on its very surface, which I believe might be less water-retaining than woven cotton.
In any case, I always leave my stored guns coated with a preservative. In the short term, oil is OK. In the long term, Boeshield (from Brownells) is better.
Silicone-impregnated sleeves are also good, short-term. Rust-preventing plastic sleeves are better for the long term.

Personally I have always stored my pistols in the cases they came in, (Unless it came in a cardboard box, then I buy a case for it which has foam.) those with foam or without. And have found that regardless of foam or no, so long as I keep the pistol cleaned and oiled properly I don't have problems with rust.

+1 what Steve M1911A1 said.

+2

+3

What about keeping them in a gun blanket? or Gun sock?

Also if using foam, maybe use the oil paper in between the foam and gun.. S&W used this in there packing of my Nickel Plated model 29.. I have heard of the foam coming apart over time and sticking to the gun possibly ruining the finish. and this prevents it.
Rocker

Some (most?) gun oils will eventually dissolve foam, and some will make it crumbly. Some kinds of foam will stick to the gun, especially if the oil you're using dissolves its surface a little. Oiled or siliconed paper between gun and foam is probably a very good idea, especially for long-term storage. There exists rust-preventative-impregnated paper, too: see Brownells.
Silicone-impregnated gun "socks" seem to be working well for me, but I would not use untreated fabric because it attracts and holds moisture.
Thick-plastic-film gun bags, especially those pre-impregnated with rust preventative, are very good for long-term storage.
There are also rust-preventative "chips." Once again, see Brownells.

Brownells—click on: http://www.brownells.com/