More than likely there was some damage to the vehicle, which was totaled by the insurance company as being cheaper to total than repair. At that point, it would have a salvage title - which many take to be as a vehicle that has been scrapped. You can buy vehicles with salvage titles.
I thought the whole point of Cash for Clunkers was to get the vehicle molten back into metal for China, or sent to Mexican drivers, not re-sold in America.
You can. It may be sloppy reporting, or poorly chosen words by the unnamed LEO. But, TX has several levels of salvage title, with one of them being "non-operative title" (or something like that) and this is to be the title given to the cash for clunkers vehicles - cars that were not to be repaired.
I suppose it's possible that someone purchased a vehicle legitimately, that had a salvage TX title, and then repaired it to a level that restored it to what appears to be without defect, as the car in the videos and pictures appears to be without defect, with the intentions of blowing it up.
Or, might it be more likely that someone got their hands on one of the tens of thousands of vehicles that was supposed to be sent to the crusher, only to be sold illegally. I think the LEO's words - "recorded as scrapped", is more reflective of this scenario, than the former scenario. Remember, it wasn't reported as stolen.