I am a fairly new member and have not previously seen this thread, but have now had an opportunity to read through it.
If I can help with a little background, I would reiterate the point made by others that no 'Royal' jewels are ever in danger of being sold; the pieces being disposed of are pieces that belonged to members of the Royal Family.
In my humble opinion, the real problem nowadays for members of the Royal Family is a combination of inheritance tax, lack of money [this is relative of course!!! - and also related to inheritance tax, come to that] coupled with the fact that there are relatively few occasions to wear grand jewellery nowadays, which means that you are in effect keeping something that you only get to wear (say) once a year if that, and so also have the bother of having to keep it stored somewhere safely.
Don't forget that in the days when there was a more formal structure to the Royal Family, Regular Courts were held several times each Season [full jewels required, and an opportunity to 'vary the tiara' by wearing a differnent one each time], and then there were frequent 'white tie' balls given by the Aristocracy in the ballrooms in their grand houses and finally the Debutante Balls at which fond parents would attend with their offspring.
With hindsight, Princess Marina, Queen Mary and the like could have saved their heirs a lot of trouble by seeking out the monarch and 'using him or her' to in effect hold their grand jewels in trust. No inheritance tax would be paid in this way - the tiara or necklace etc that passed to the monarch would be treated as inheritance tax free, and the King / Queen could then 'lend out' the particular piece to its 'intended inheritor' if you see what I mean. The problem is that nobody could have forseen the rise of the rates of inheritance tax coupled with the relative 'lack of money' that would affect subsequent members of the Royal Family.
With regard to Princess Michael, the rumours have persisted for years that she has had the many of the pieces inherited re-set with paste, not even CZ. I don't know - and have no way of knowing whether these rumours are true. What is true is that at one stage Prince and Prince Michael's lifestyle [athough relatively modest for 'Royals' was nevertheless quite expensive to finance]. Although Prince Michael was not 'poor' by many of our own standards, as a younger son of a younger son, his own inheritance was modest by royal standards. The PMKs had a country house to run, they had a racehorse or two, they had a lifestyle that although quite modest by other Royal standards nevertheless was quite costly. Princess Michaell herself had no money of her own and it must be expensive dressing to the level that she does with no real financial 'help' to pay for her dressmaker's bills - the couple have no Civil list [or equivalent, since the Queen mostly refunds Civil list payments] and so when they turn out at engagements, they have nothing to finance their appearances with other than their own money....
The rumour that they had had various jewels re-set with paste can be traced back to remarks by their former private secretary, the 'talkative' John Barratt, who used to recount a story about one of the 'diamonds' falling out of PMK's tiara just as she was about to leave for a function, with someone then treading on it in the confusion, only for it to fracture like the glass it really was. John Barratt also recalled how he was forced to take suitcases full of silver cutlery to sell secretly in Switzerland, and how some of the furniture the Kents sold was actually the property of the Queen, as she had let the Kents furnish their London home with furniture from the royal stores.
How can we know whether this is all true or not? The answer is that we cannot. However, it is true that the Kents had to sell their beloved Gloucestershire home a few years ago, because they apparently needed the money to meet the new rent [stated to be £120,000 a year] on their Kensington Palace home- previously the rent was much more modest, and indeed it was paid for by the Queen when it initially initially revalued, but this stopped when Prince Michael was 65 [he does not count as a 'working Royal']. In my own view, the PMks would have every justification for replacing at least the occasional diamond with paste!
Hope this may help,
Diarist