It's not a stupid question! It is composted. It takes a long time to leach out the salt, and a long time for the strong fiber of the grass to start breaking down. But, many local gardeners swear by it and some others don't even know about buying fertilizer because that's all they know. It can take months for both processes.
Unfortunately, some uninformed people don't understand about the value of the eel grass while it is alive out in the flatts, of it's use when it washes up. Just because it isn't pretty...