What would cause siding to warp on a gas fire place insert?

You basically answered your own question, you definitely need the double wall pipe like you saw online, the outside pipe is for fresh air and it helps keep the pipe cooler. Your siding is melting from the heat and you also have to think about how dangerous it is to have that much heat near combustible materials like your studs and sheeting. If you had it installed, you need to get a hold of the installer and have it put in the correct way, if this was done before you moved in or bought the house, you need to find someone to fix this if you can't do it yourself. It is not that hard of a job as long as you can get to the pipe inside the house.