The damage isn't really the issue, it's the fact that new vehicles of an out-dated design were sanctioned with less than a decade of use before being scrapped.
The C stocks were a special case.
Firstly, they weren't the only cars which needed heavy repair, one other car (adjacent in the Aldgate formation) also needed major structural work, as well as a number of other cars needing more minor attention.
This combined with a fleet which was already short of space capability - from memory I think the peak requirement was 41 out of 45 trains, and more unusually on the C stock routes the off-peak requirement was almost as much, combined with an ageing fleet which was always one of the most unreliable on the Underground.
I'm not sure if there was any insurance or external funding arrangement, given how the trains came to be damaged. Also at the time the S stock was a few years away and there may have been thoughts that it might be best to play safe in case S stock ended up arriving later than envisaged.
All the above factors combined led to a decision taken to restore the fleet to its original size.
Although the bodywork on the new cars is new, I'm unsure how much of the underframe and equipment was re-used.
In the event, I'm not sure how much value the company got from them, as the revised Circle timetable reduced the trains requirement, and not long after the two rebuilt units became available unit 5595 became long-term stopped and never worked again, so the situation can't have been as tight as first thought.
It would have been good to see one of these preserved from a historical viewpoint, although it's understandable if these were sensitivities involved.