Update: My insurance found another dsg transmission, rebuilt with about half the miles on it ( same make/model etc.). Apparently the company they bought it from offer a lifetime warranty. However, I'm sure that comes with a lot of " *." Anyhow it will be $3600 vs. $7200 (which includes a subframe part replacement, also salvaged). To answer multiple questions on the JB weld/epoxy: I'm sure it will work...in the short term. I'm not so confident it will last the lifetime of my car. I'd rather have the peace of mind, and better re-sale / trade-in value. Not to mention, potential metal bits/shavings that may have been since introduced into the housing (potential for future damage), along with the loss of a significant amount of transmission fluid.
As far as the insurance company going after the city goes, I'm sure that will ultimately go nowhere (for aforementioned reasons), but who knows. I'm sure this whole thing was caught on a dozen different cameras ( intersection,Kroger grocery store, wells fargo bank, gas station,etc.), none of which will be petitioned, none of which will have footage even stored that long.