As I recall, the use of the essences in Magincia was mentioned, once, by Draconi, and I think he had a question mark at the end of the sentence.
Meaning he was probably floating a notion, not committing to something. And he's gone in any case.
I've tried to find the quote and can't, though. So I don't know.
As to the current plan itself, I find myself curiously indifferent towards it. It has possibilities but we all know that, if there's, say, 10 plots (I didn't read enough to know how many plots their might be), even if 9 out of 10 owners agree to some central plan and build an awesome looking New Magincia, all it'll take is one person building a McDonald's or Wal-Mart to wreck the look.
My guess is that they wanted to fulfill Draconi's long-ago promise that the players would have a say in what happened in Magincia, and this was the cheapest and most direct way they could think of to do so. ("Let's just let them build houses there.")
My personal preference would have been for them to just abandon Draconi's long-ago promise and build an NPC town with virtue quests and cool virtue-related content.....
OR (even better) to design a small, say two-month or three-month long event arc wherein players would do various types of quests which would build up Magincia in, say, 1 of 3 ways. (As in 3 possible designs, different outcome, potentially, each shard, outcome of quests determines what happens.) None of the quests would be Evil-oriented or anything, just 3 different ideas on how to proceed, and we decide. I'm betting that's closer to what Draconi had in-mind but we'll never know unless he rolls on and tells us.
But that's just me. I'm a little surprised there aren't more people defending the use of player housing in Magincia. Or is it that you object to the distribution scheme, not so much to the idea of player housing there? If so, I, for my part, am holding out until I see what the actual plan is; right now we don't know much and are speculating a tad too much for my comfort.
What I'm actually much more curious about, though, is what NPC buildings they are going to put in.
I heard them mention a cathedral and that has a lot of cool RP possibilities.
The central conflict of Magincia is what happens when your heart is humble, and your mind is full of hubris. Your hands can only follow one of the two, and Magincia long ago chose hubris.
If done properly, if it included Virtue-related content and if the RPers picked up the ball and ran with it, then a full-on cathedral dedicated to the Virtues in general and Humility in particular could capture that paradox beautifully.
If done badly or mediocre-ly, though, it could be just a big building with an ankh and pews.
-Galen's player
And yes others would say...we ALL PAY THE SAME to play yatta yatta ! 
