The objective of Part 2 is to employ a computational scheme to investigate the difference in flow pattern, pressure drop, and heat transfer in a gas turbine’s dump diffuser and over the outer surface of the combustor with and without a sheath. Both experimental and computational studies are performed. In Part 1, the experiments were conducted under low pressure and temperature laboratory conditions to provide a database to validate the computational model, which was then used to simulate the thermal-flow field surrounding the combustor and transition piece under elevated gas turbine operating conditions. For laboratory conditions, the computational fluid dynamics (CFD) results show that (a) the predicted local static pressure values are higher than the experimental data but the prediction of the global total pressure losses matches the experimental data very well; (b) the total pressure losses are within 3% of the experimental values; and (c) the temperature difference between the sheathed and non-sheathed cases is in the range of 5–10 K or 16–32% based on the temperature scale between the highest and lowest temperatures in the computational domain. Under the elevated pressure and temperature conditions in real gas turbine, removing the sheath can achieve a significant pressure recovery of approximately 3% of the total pressure, but it will be subject to a wall temperature increase of about 500 K (900 °F or a 36% increase) on the outer radial part of the transition piece, where the flow is slow due to diffusion and recirculation in the large dump diffuser cavity near the turbine end. If modern advanced materials or coatings could sustain a wall temperature of about 500 K higher than those currently available, the sheath could be removed. Otherwise, removal of the sheath is not recommended.