Dochris,
You may be concerned about how dead the drive really is just because Drobo tagged it as bad. But this is Paul’s thread, and as I interpret his posts here, I think it is impossible to “just rebuild the array and then put the drive back in”, as Paul suggested might be one option “to cheap out”.
It was stated above that the only way to reuse a drive marked bad is to reinitialize the array and reload all the data. If that is correct (and is correct, AFAIK) then short of reinitializing the array I don’t think there are any options to “reuse a bad drive”, in the manner in which Paul asked.
I would personally not reuse a drive that my Drobo marked bad, especially if it were under warranty. But that’s almost religious and philosophical since DRI doesn’t disclose the nature of the problem (unless maybe if you submit logs and get a sympathetic rep that will detail the problem).
I would suggest to Paul the following:
-
Modern drives are cheap
-
You have a pile of them so you shouldn’t even think about “cheaping out” 
-
As near as I can figure, modern consumer drives have about a 10% per annum failure rate, more or less. The real number is probably far greater than 1% but also far less than 50%.
-
The weakness of a 4 bay Drobo and any other conventional or unconventional Raid 1 or Raid 5 array is a double disk failure, which must result in the loss of the array.
-
If you put a suspect drive in your Drobo (or back in your Drobo) your entire array is more or less subject to that 10% failure rate since a suspect drive, if it really does have a problem, will be unlikely to survive a long relayout, or maybe a double relayout depending on the sequence of events.
-
The name of the game is to buy lots of drives, make lots of independent backups, and don’t rely on suspect drives 
Regarding the relay issue…
I very distinctly recall a thread on the old Drobospace forum where users reported that their Drobo went into a relay with a flashing red light on a drive, with no hope of completing the relay due to insufficient space on the remaining drives.
I also distinctly recall a DRI tech rep responding to that thread, trying to explain the logic behind that. As I recall his argument was that it was better to get as much of the relay done as soon as possible, presumably leaving only a partial relay remaining when the drive is replaced. I also recall his logic was somewhat unclear so I may be filling in a few blacks with my “presumably”.
Forum members then counter-argued that it was too risky, being subject to a 2nd drive failure with no hope of restoring redundancy. At the time I agreed with the forum members but in thinking about it now, it really doesn’t matter as long as the relay ultimately gets done in the same amount of time (which is impossible for us users to ascertain but I will assume so for argument’s sake).
That is my distinct recollection of the discussion that occurred about 3 years ago now. If the Drobo no longer does partial relays with insufficient space for completion then that may be due to a subsequent firmware change and I stand corrected. As I said, I’ve never had the unpleasant opportunity to test that logical branch in the relay decision tree 