You're right... my terminology was off. The polishing that would produce concentric circles on the coin inlay was have to be on the working hub that is used to produce the die. Die wear as material flows across the die during coining would gradually smooth out the circles.

I can't see any reason that waste material from the planchet punching process couldn't be recycled. Is it just impractical for cost reasons? Punching from sheets is the way the US Mint makes US coins (tokens today). I know they used to recycle the 90% silver waste; maybe not today since it is a clad material with much less value.