Wait, can anyone who is familiar with MSC confirm this? Is this how MSC works?
I work for the Mastercoin Foundation. This is how it works.
So everytime there is a large asset issuance on MSC, an ungodly amount of MSC needs to be acquired?
Only if the ratio between BTC and the new token is intended to stay fixed during the crowdsale (independent of market fluctuations.) The protocol functions as a fixed ratio of MSC to the new token. Adding the extra BTC step is where it becomes more complicated.
And I guess I didn't catch this part but where does the MSC that is used to create MSAFE go? I assume it doesn't disappear, and it can't be going back to the maidsafe guys because why then why would they even need a large MSC loan? They can just keep reusing the same MSC.
And they dont. In this case, the loaned MSC is being used by the protocol to generate token for purchasers who use BTC. Those MSC get returned to the loaner once the crowdsale completes, and the BTC stays in the hands of the party running the Crowdsale (in this case, MaidSafe).
The more I know about MSC, the more I become a believer that XCP will overtake it one day. It may not have the marketing and funds that MSC has, but the fundamentals seem way more solid. But I am not trying to turn this into a discussion on XCP. Not that that should stop you from immediately running out to buy a few hundred, or thousand, whatever floats your boat 
Thats your prerogative. We have nothing against the Counterparty guys, and wish them the best in their project. We share best-practices and help one another avoid pitfalls. We have open communication between the developers of both projects.
Do you have something against an automated token generation mechanism that takes one token as input and spits out another token(s) in return? That seems like a genuinely simple way to perform a Crowdsale of a new token, which is what we have implemented.
Craig