Block heater melt down

The way I read it I think that’s the question the OP is asking.
One scenario, heater element failed causing loss of coolant and engine overheat. Repair heater and service cooling system and hopefully that’s the end of it.
The other scenario is an engine/cooling system failure causing overheat which also destroyed the heater element. Damage to motor/cooling system TBD. Given a choice I’d pick the first one.
I think running with block heaters on is a non-issue. People forget to turn them off all the time.

I agree that Id pick the first one. That heater is designed to get hot, handle the temps. My guess as well is that the heater failure lead to a fluid discharge that allowed the engine to overheat.

Running with the heaters on should be avoided, but it also shouldn't cause damage. More hours unnecessarily on a heater shortens its life span, but it shouldn't cause damage unless the type of failure you experienced takes place.

The Kim HotStart instructions states not to run the heaters after the engine is running to avoid damage.
No further notes on what is damaged.

+1.
The opposite scenario of an engine overheat for some other reason, melting the heater as a consequence, is totally implausible.
Temp gauge and alarm (which BTW are connected to separate probes, on that engine) should have gone through the roof well before the coolant becomes hot enough to melt the heater.
Assuming that the coolant CAN get hot enough to melt the heater, which I'm actually a bit skeptic about.

Sorry to hear that.
Can you remember what sort of temp the coolant reached, and possibly also oil temp if available?
Besides, for how long approximately did the engine run hot?

Ok, but in principle the engine should withstand a very short burst of everheat, without consequences serious enough to find coolant in the oil.

What I would fear is that the coolant dump was so fast that the temperature probes (both the one for the gauge and the one for the alarm) remained dry before even sensing the coolant temperature increase.
And in this scenario, by the time the alarm goes off and the temp gauge show a higher temp, it's actually the whole engine block that is overheating rather than "only" the coolant, if you see what I mean.

Anyway, involving an MTU specialist is certainly the best course of action.
I for one would be curious to hear his opinion, if you don't mind keeping us updated!
In the meantime, all the very best for his findings.

Correct.
They fitted a bronze raw water pump which runs forever and never needs an impeller replacement, but God only knows what they were thinking when they made it belt driven.
MAN engines based on the very same block have a more basic rubber impeller pump, but gear driven.