Mud balls (or poop balls, either one) will dry very hard and tight on the toes, cutting off the circulation and killing the toe parts inside the balls.
I constantly fight it wirh my quail, who manage to do it to themselves with poo, while on wire and only having their sandboxes to collect poo in. Every few weeks, when the full cage cleaning/scrubbing gets done, I have to check everyone closely, to catch the balls before they start to build up and around the toe. The ball starts under the nail, and grows out, up, and around from there, which is why it can be hard to notice before it starts around the whole toe... especially on tiny feet like quail have.
Hopefully that will help someone else notice it forming, by knowing where to check on the toe.
As far as then growing back, if the nail bed has been damaged, they often won't grow back, and of course, any toe part itself that died won't grow back. However, birds are often born with missing toe tips, anyway (Silkies, as mentioned, and Banty Cochins are bad about having that in their genes). They grow up fine, though, and live long, healthy lives without those toe tips. They just shouldn't be used for breeding (though they can still be fine broodies and mamas!).
I constantly fight it wirh my quail, who manage to do it to themselves with poo, while on wire and only having their sandboxes to collect poo in. Every few weeks, when the full cage cleaning/scrubbing gets done, I have to check everyone closely, to catch the balls before they start to build up and around the toe. The ball starts under the nail, and grows out, up, and around from there, which is why it can be hard to notice before it starts around the whole toe... especially on tiny feet like quail have.

Hopefully that will help someone else notice it forming, by knowing where to check on the toe.
As far as then growing back, if the nail bed has been damaged, they often won't grow back, and of course, any toe part itself that died won't grow back. However, birds are often born with missing toe tips, anyway (Silkies, as mentioned, and Banty Cochins are bad about having that in their genes). They grow up fine, though, and live long, healthy lives without those toe tips. They just shouldn't be used for breeding (though they can still be fine broodies and mamas!).