1. Why would you pay that kind of money for shredded notes?
Novelty value, for the most part. The seller claims to ship it "direct from Germany", so it's probably more or less the same price the Bundesbank sells the bundles for.
2. Why would you want shredded notes?
See above. You couldn't "reassemble" any of the notes; the confetti would be tumbled after shredding, so it's unlikely a particular 1 kilo bag would have all the pieces needed to reassemble any one note.
3. Is it even legal to own shredded notes that were intentionally destroyed by Bundesbank?
Sure. The German Bundesbank has taken the lead in innovative ways to dispose of it's "scrap" material; their obsolete and foreign coins are bagged up and sold, and the same happens to their shredded notes, by the bag and even by the sackful, as seen in this recent Deutsche Welle article
. The American BEP does the same; their 5 pound bags
cost $45. The Bundesbank bungle there on eBay weighs about double the BEP one, so that seems to be much the standard price per pound for shredded money.
Environmental regulations in Germany prevents the Bundesbank from burning shredded notes. They've got to do something with the stuff; anything they don't sell has to go to landfill.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis