Yeah, if you're at the minimum weight then you have less weight to accelerate, turn, stop etc. I dont think there are any other noticeable benefits with using Mg alloy steering bosses for example, it's mainly just the to connect the steering wheel to the column. Or the engine clamps, if you could fix the engine to the chassis without clamps and still be able to easily remove/position it, then that would be better (and lighter).
Mg alloys have been researched for use in engine blocks and cylinder heads, so they are not very flammable when formed as an alloy with correct surface and structural treatment. Are you sure the filings you burned weren't just Mg metal? One of the reasons for alloying Mg is to reduce its flammability.
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