Under what circumstances (if any) should an MX record point to localhost?

Definitely a NO, not with a 127.0.0.0 IP.The entire 127.0.0.0 range on IPv4 works as loopback addresses, thus when any machine connects to IPs in that range it will try to connect to itself.

Your MX record IP address should be accessible from the outside world and what that result is telling any server doing a MX query, to try to connect to itself.

If my server was trying to send you email, it would lookup the MX record and then connect its own IP address, send the email and fail.

The relevant RFCs say:

• The MX resource record MUST point to a fully qualified domain name (not an IP address) of a server on the public Internet which accepts mail for the domain. Note that this server does not necessarily have to be in the same domain as the MX record. RFC 1035 section 3.3.9

• Addresses in the 127.0.0.0/8 range MUST NOT ever appear on the public Internet. RFC 5735 section 3

Note that some mail servers will reject email from senders not in compliance with the relevant RFCs.

Short answer: It shouldn't.

Long answer: If the domain in question (DIQ) should not receive email, then putting a loopback address in for the MX record causes the sending server to attempt to connect to itself. This saves the DIQ a few measley bytes and possibly cleans up the firewall logs (if anyone is even watching) when other mail servers attempt to connect. However, in my opinion, the bandwidth savings is not enough to justify violating RFC 3330.