The basic engine is made for the Mercedes-Benz A-series automobile, I believe. It gets a gearbox to drop the revs to a level suitable for a propeller and a lot of other accessories to make it an aircraft engine but the core is a mass-produced engine for a sub-compact car. This must make it quite cheap compared to the average low-volume production aircraft engine.
I would guess that the melting down is for two reasons.
First and most important, you wouldn't have that engine going out the back door to be resold and used in another aircraft, perhaps resulting in legal problems for Thielert.
Secondly, most European countries have programs that require recycling, and aluminium is a prime candidate for that.
I flew a diesel-powered DA-42 in the U.K. when I had to do an IR check. I really fell in love with it, especially the Garmin glass. Of course I only had a few hours with it and it was almost new.
The DA-42 does look a bit spindly and insubstantial but then I am used to old-fashioned airplanes made of sheet alloy riveted together. This modern way of building things out of molded composites and CNC-milled alloy is almost unknown to me so that I don't know how to evaluate it.
I hope they get the teething troubles sorted out because it looked like a really neat piece of kit. What with AVGAS being harder and harder to find in many parts of the world this looked like one way forward.