The loom is sandwiched between the two sheets that make up the floor, it is amazing that they offered to replace it at all because as far as I know there is no way of doing this without serious damage to the vehicle.
Well I don't know if they quoted a specific number, but basically the insurer said that after consulting with Mercedes they established the repair would cost more than 50% of the value of the car so they are declaring it total loss. Maybe Mercedes just told them lol no, can't do this guys.
Yes, that's likely exactly what happened. Volvo pioneered that trick, it makes good sense as long as everything works but if it ever breaks you're done. The big plus is obviously that the loom is very well protected but insulation tends to lose its plasticity over time and in case it gets pinched anywhere you're in trouble. The only feasible option is probably to route an alternative loom through the cabin somehow and to leave the old one in place but non-functional. Even that would be a pretty tall order because there is simply no way to do this without fairly structural changes to the car in order to make room for the new loom in such a way that it is protected from mechanical wear.
On classic cars you can do this sort of thing easily enough, there the chassis was made first and then the wiring loom was put in place but on these modern vehicles you're sore out of luck. And EVs will likely be worse still, what with all the HV DC cabling to motors, batteries and charge ports.