I met the Police Chief today, and he confirmed that they can't send guns to destruction anymore, unless they are illegal or unsafe.
I did some Googling on this and found that there was a House Bill (2376) to amend TCA 39-17-1317 to prohibit the destruction of functional and legal firearms. This bill obviously passed with flying colors and was signed by Bredesen.
I haven't found the amended law text yet but here is the bill that, in short, proposes that the option to destroy firearms should be omitted from the law:
http://www.capitol.tn.gov/Bills/106/Bill/HB2376.pdf