Will Djed coin be stable enough so that one could safely put their life savings into it without the risk of depegging? What if the price drops so that 400% reserve is not enough? Where does the demand for the Shen coin come from, which will be used as the collateral?

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Shen are a good buy if you believe in rising ADA. In addition to the fees going into the reserve, also less of the reserve is needed for ADA/DJED liabilities, so that the ADA/SHEN rate grows, giving an additional boost over just holding ADA. That might well give people incentive to buy SHEN especially when ADA is low and SHEN are, therefore, cheap.

If the reserve ratio drops below 100% without people ready to buy SHEN to mitigate that, then DJED will depeg. Selling back DJED to the contract, will only give the share of the reserve in this moment, not the current value of 1 USD in ADA. But DJED holders will always at least get this share of the reserve. And this situation just depends on the ADA/USD exchange rate, not on any DJED or SHEN trades. So, if ADA regenerates, DJED will also regenerate and you can sell it to the contract again.

Regarding your first question, I personally would never put a significant part of my life savings in anything remotely crypto-related. That is all in real money. But as long as you think ADA is okay, DJED should also be okay.