Hello Harry, welcome to Disco 1 fairyland.
I had the same problem with wet sponge on my 1996 Disco.
However, what I did was. Dried out the sponge. Two days in the house, SWMBO not pleased.
Painted the edge of the boot floor with hammerite, very slight rust marks.
BUT, looking at the floor I guessed most of the damp was coming through the inspection hatch to the tank as condensation. I used an old trick and covered the hatch with a full newspaper to absorb the condensation and checked this every couple of months and replaced paper which was usually dry.. Result:- boot floor and sponge completely dry. I had the Disco 1 for 9 years and 6 of that had the newspaper treatment, and was sold with a completely dry floor and sponge. That was my experience. Easy to do and check. Enjoy your possession.

This lead has just decided to go fizz and bang and puff out a load smoke when I started engine this afternoon.

Its a Lead from battery to fuse box it seems.

That's tomorrow's job clearly identified then .....!

Shame, as I wanted to press on with replacing brake vacuum pump and blanking Egr valve too.

So, tried to replace brake vacuum pump......couldn't get the nuts undone. Job aborted.

Next job was EGR valve blank and replace hoses with silicon ones. Ideally wanted to blank off directly at manifold but again, couldn't get the damn nuts off so blanked it on the next area.

Inlet manifold was quite gunked up but not too bad, left it on for now. Plan to de gunk real soon. So, shiny blue hoses and nice new jubilee clips. ....... Simple things....... Etc.

Next was to resolve the cause of some massive puffy smokiness.. Turned out to be the fusable link off the battery. Must have shorted out. At time of investigating, also noticed that the rear half of the wire that connects all 4 glow plugs together was burnt to buggery as well. F F S !!!!!!!

Lightbulb moment. Remembered that just up the road from me was a local LR garage that was breaking an old D1. A quick phone call, short drive and offerance of 15 Discovery pounds, we where able to whip off more than enough fusable link wire and a replacement glow plug connecter wire.

Phew! Back home, wiring sorted with some trusty help from a great mate. Then realised while connecting glow plug connecter wire, one of the glow plugs was loose, burnt and black.

Double F F S !

Shop, spend, glow plug, home again.

Temporary loss of battery connector bolt. Found it in obvious place. Panic over.

Took it for a drive and although I haven't done enough miles to notice any economy difference, the performance off the Mark and General feel of the drive in terms of power seemed an improvement. No additional smoke from exhaust.

Frustrated that I couldn't get some nuts undone to get jobs done exactly as planned but it's in garage for some work to brake lines so will get sorted then.

Today was productive, therapeutic and enjoyable.

Credits to the mighty P, this forum, my Haynes manual, neighbour for some spare 8mm nuts and lovely lady of mine for regular hot drinks and sausage sandwiches.