RhubarbCommando said, Occasionally, MG have brought out a model that wasn't "badge engineered" (i.e., a standard chassis with a sexier body - and probably a higher tuned engine)
How did this label come to apply to the process of using a different car body?

i didn't read RC's post, so i'm unsure of the context, but it appears that he used the term differently than i've heard it. "badge engineering" is usually a pejorative description of "new models" that are really nothing more than the old model (or even a competitor's product) that's dressed up with "badges" (ie trim, placards, etc) to appear new and different. it really suggests a complete *lack of engineering, so i can't imagine how it could describe "a standard chassis with a sexier body"