When we put effort into anything in life, we feel an attachment to it. This is natural - you've invested time, energy, thought, and emotion into this product. You said yourself that you built several units with your own hands. Of course it's natural to feel that this product is an extension of who you are as an individual. In a sense, it's natural to take offence to someone else wanting to destroy that product. Destroying it is the ultimate form of rejection, and it's hard to not take that rejection as a rejection of yourself.
However, there is another viewpoint which may be helpful. This viewpoint is built on the simple fact that it is not literally you that is being destroyed or rejected, it is an inanimate object. Yes, you may have built that object with your own two hands, and you may feel that it is an extension of you, but other way to see it is that the object was simply something that you had created, at a point in time in the past, based on your skills, knowledge, and working environment at that time. Are you still that old person? Or have you grown and developed since then? Maybe you've even grown and developed as a result of the failures and frustrations surrounding the older version of this product?
Who are you today? What is your current identity? If you had set about making that product right now, I'd be willing to bet that your new version would be significantly better than your old version. You basically indicated that this is the case. You've learned from your failures. It may be helpful to consider: be willing to let go of who you used to be as you embrace a newer, better version of yourself.
One of my hobbies is building musical instruments. Sometimes, when new builders create their first guitar or an experienced builder tries a different style of construction, it's fraught with issues - and may just be literally unplayable to the point that it doesn't really function as a musical instrument. Browsing online forums dedicated to guitar building shows the wide range of responses builders have to their failures. Some people try to hide or cover up their mistakes. Other people hang the unplayable instrument up in their workshop as a "reminder" of where they've come from - a sort of tribute to how much they've changed since then, as they can compare new instruments to their older failed instrument and see the progress they've made. Other people joyfully smash it and throw it into their fireplace and post a video of the burning wood! These people often talk about how satisfying it is to "let go" of a poor product as a way of moving past it.
Of course, this is all rather personal, which makes your question very difficult to answer objectively. You're certainly allowed to feel hurt by what has been proposed, and if you do feel hurt, it would make sense to object to it, or suggest alternatives (maybe the party can feature the new version and celebrate how good it is, rather than focus on destroying the older, bad version). It doesn't really matter what's "typical," what matters is respecting your own feelings. Especially in a workplace, it could be easily interpreted as "unprofessional" to destroy anything.
But, it may also be worth considering how you may be able to see this as a growth opportunity instead of a hurtful act.