Yes. But they're designed to burn up on entry. I think it's been mentioned on HN that the delay in their laser link network was due to the need to redesign the laser component to ensure it would break up.
I'd also imagine that at some point in this breaking-up-process the pieces are small enough to sublimate from the extreme heat, i.e. "burning up".
Think of that, but for, well, everything.
I wonder if anyone has ever tested the whole thing about field mice surviving a drop from any height due to their low terminal velocity... those bat bombs in WWII don't count.
And here's a timelapse in a hypersonic plasma test chamber: https://www.youtube.com/watch?v=q_AcG4ZQItg
(Keep in mind the pieces that come off are still going to keep being heated even after they seperate.)
It largely does atomize yes, depending on the material. Which is why they're designed out of materials that will do this.