This iPhone will self-destruct in five seconds

Two questions come to mind about Apple's recent iPhone update which, as Apple had warned, makes hacked iPhones inoperable:

Who's better off for this? Owners of hacked phones now have $500 paperweights. Granted, they were warned and I would think were in violation of some license or service agreement. There are reports that some owners of non-hacked phones have lost contact data and possibly the use of their phones. Apple comes off looking like The Man instead of The Rest of Us, thereby calling down the wrath of hackers everywhere, but what were they going to do? The one group clearly to gain is makers of whizzy phones that aren't locked to a single carrier and/or don't self-destruct if you try to unlock them.

Just how does the self-destruct feature work? Apple asserts that the hacked phones are now "permanently inoperable". Did the update fry some hard-to-replace chip? If not, just what claim is Apple making? Clearly the self-destruct update will have left affected phones unable to receive further updates the usual way. But is it impossible even in principle to re-load the OS, for example by copying the image from a working phone? I would expect it to be difficult -- dongle-based copy protection is a lot easier to pull off for something highly integrated like a phone -- but could not even Apple do it back at the factory? [My understanding is that they just re-flashed the firmware and that Apple could fix such a phone at the factory (but has no reason to). In some cases, such a phone might also be fixable without help from Apple.]