I can't say that I've read the entire thread (It's very long so far), but I have read a good portion of the original post and many of the replies.
I agree with OP 100%. A simplified version of the real-life process makes a lot more sense than being able to repeatedly quench (???) a tool head. I took a material science course which spent the entire second half of the course focusing on iron & steel properties, including quenching & tempering. Needless to say, OP is correct about the physics. To respect realism (as seems to be a big priority for The devs), the current system should at least be reworked to fit OP's idea a bit better (in my opinion).