Long ago I worked in an oil refinery. Crude oil as it came off the ship was pretty smelly stuff in most cases.
In the refinery we had a tank where all kinds of hydrocarbon crap was sent, and we ran it back through the still along with fresh crude oil. In a few rare cases, if appropriate, the product was blended in with something compatable, such as heavy fuel oil or asphalt.
I think the problem with re-refined oil is one of perception and price. Why buy "re-refined" oil if "virgin" oil is available at the same price? Much of the market for re-refined oil is with government agencies under a politically correct mandate to do something positive for the environment.
Certainly waste oil should be collected and put back in the refinery somewhere. But I think it makes not much difference, from an economic and environmental aspect, as to whether the waste oil goes back into the still along with crude oil, or is processed separately into "re-refined" motor oil.
One problem is that people who drop off oil may have mixed in other, non-compatable materials, such as ethylene glycol, that have to be separated out if the oil is to be processed directly into "re-refined" lubricants.
I would only consider re-refined oil if it came from a source I really trusted.