Where Do Dealers Send Scrap Metal?

Russ,
I suspect that dealers who buy junk bullion have a smelter or two lined up. The dealer accumulates the coins until a certain amount is reached and the off they go.
I also suspect that most dealers do not repackage the coins into bags for sale to the public but perhaps some do.
X dollars face value for Y dollars.
I had a good experience or two at a smelter within a reasonable distance from my home. It cuts out the dealer as a middle man.

Old school dealers are loath to do much of their business in bullion but that has become the norm. If not bread and butter at least a substantial chunk of business today.
Especially for the remaining brick and mortar shops.

Longing for the good ol' days . . .

Sounds as if your 'good' dealers are great people.
That same smelter that I mentioned has a small case for special items. I noticed
two 1884CC dollars from the GSA sale. Well, he offered to hold them for me and
a few days later I traded for them.
One of the two I traded to a member in Sweden (We can't find them over here!)
for an 1897-S Half to complete my poor set.
Nice things happen, but this hobby requires both luck and patience.

If it sells well theres really not much of a need. If sales have been slow though and they need some immediate money its a good way to get a guaranteed fast sale which does have a value to it.

Most coin shops would probably prefer not to, but if you need to pay the bills you need to pay the bills.