That's not the complete story. They have lost one asset with a certain set of liquidity characteristics, and unexpectedly gained one with another set.

There was nothing unexpected here. Users traded their eth X days ago for dai, with the full intention of adjusting their liquidity characteristics

What happened here simply precluded the possibility of the reverse trade when the loan became under collateralized, this was not unclear to anyone involved

Traded? You mean loaned. That was always the wording that was used to promote DAI, whatever the underlying transaction might be.

Users didft "loan" their lost ETH, they traded the ETH in as collateral and took out a loan in DAI.

This collateral trade was made with full awareness that if the loan became under collateralized the ETH would be liquidated and sold at auction