Facing the possibility that they will be deeply committed to a certain religious or philosophical vision of life, these actors [in the original position] must feel their way into the perspective of such committed believers, and consider the role that first principles play in the lives of those devoted to them. Upon doing so, Rawls argues, actors in the original position come to understand that any risk of not being allowed to live according to one's most cherished convictions cannot be compensated for by any degree of economic or political benefit. Such a rejection of the very sort of cost-benefit analysis characteristic of instrumental rationality cannot itself be the product of that very faculty, but must stem instead from an empathetic understanding of others, including those very different from oneself.
Where's the rejection of cost-benefit analysis? Isn't the point precisely that the costs of "not being allowed to live according to one's most cherished convictions" are considered to be so great as to outweigh any mere "economic or political" benefit? Given that one prizes autonomy (lexically) above material comfort, instrumental rationality recommends taking the means that will best accomplish the former goal, at any cost of the latter. Such lexical orderings strike me as insanely absolutist, but instrumental reason abstains from such judgments, and so can accommodate such preferences, however crazy they may seem. So what in the world does Frazer mean by calling this a "rejection" of instrumental reasoning?
I also don't get why he contrasts "empathetic understanding" as some completely distinct, non-rational faculty. Surely empathy is required here for simple informational purposes, i.e. to enable the veiled agent to fully understand what it would be like to experience the various lives that could (for all she knows) turn out to be hers. It thus serves as a kind of perceptual input to the rational faculties.