Do they work? Yes...but you need to know why...
The Key, Like Most Things, Is Understanding How They Work
The material on “space” blankets was actually developed by NASA for the purpose of use in space to protect astronauts from solar heat, and they’re very good at it. In a wilderness setting, they do have limitations with must be mitigated though. They are made of a thin plastic film with an ultra thin layer of vaporized aluminum and reflect low relatively low heat (radiant and convective - they are non-conductive and will melt if exposed to fire or electricity).
What Are Their Weaknesses?
Since they are made of aluminum (or aluminium if you are English), they don’t “breathe” and so will not permit moisture to escape. By design, since they don’t breathe, they will increase humidity. So, if you are wearing wet clothing when you are wrapped up in them, you are adding to the moisture in the micro-environment which you are creating (thus feeling clammy after getting in with wet clothes). Increasing humidity can actually be a good thing so long as you keep it under control (try to have dry insulation in it) as it may reduce the amount you will sweat... unless there is a breeze. Having a blanket style is a big challenge here as, no matter what you do, you will face the challenge of warm air and moisture leaving, cold air replacing it, cooling your and moisture (imagine trying to stay warm all night in the same conditions with your mummy bag unzipped all the way).
They are, in the end, plastic and aluminum. This plastic is thinner than your kitchen wrap and the aluminum thinner than your kitchen foil. Together, they are much stronger than the two but that is still relative and they will tear pretty easily.
How Can I Make Them Work?
To make the most of them, you need to be as dry as possible when you start. This is tough since the point is to be an “emergency” blanket and you may be wet to begin with. You need to weight the benefit of your wet clothes - are they too wet to be effective as an insulator currently? They are probably too wet to be effective in the blanket. Your wet clothes may serve better as a barrier between the ground and you in the blanket, than actually on you - this is a judgement call though, and there is no hard and fast on it. Some may read this and say “Bullshit! Never take your clothes off!! You’re always better off with them than without them!” to which I say - I haven’t yet encountered an “always” scenario in the backcountry unless it was to keep the red stuff in the body and keep the patient warm and breathing.
Before you get hung up on the concept of laying on wet clothes with an emergency blanket over you, allow me to clarify. I do not recommend the blanket style (remember the open sleeping bag concept). I prefer the bivvy style, specifically those made by Survive Outdoors Longer (SOL). They have a tarpaulin-like outer layer which provides a bit of strength to reinforce the thing, the seams are sealed to ensure adequate insulation from wind and rain, and they work excellently for patient transport and evac with the added benefit of having only one opening for hot-cold air exchange - just like your sleeping bag; I picked one up at REI for about $5.
Finally, make sure you keep in mind that they don’t make you warm, they simply reflect whatever heat you put out, and hold in the moisture in the air - and they reflect external heat away so you will not be warmed by the sun when in them (their very specific design is to prevent that). If you’ve been out on a hot day and tried using one and got hot in the sun that isn’t proof that “Oh look! The sun did make it hotter!!”[ you were warmer already, the ground under you was warmer, the air around you was warmer when you put it on, the sun didn’t make it warmer inside it because, you know...science. Like a sleeping bag, if you’re cold and wet when you get in it, you’re going to stay cold and wet for a while unless you do something to change it. They don’t do anything to change the laws of physics, so convection, reflection, conduction and radiation are still going to affect how you lose or retain heat, you just need to understand how they function in order for them to work to your advantage.