A lot of the castles and palaces have been donated to "the public" that maintains them as tourist attractions or museums. Also Europe is not like the US, where you can just build in a lot of unincorporated areas, so building a new luxury home out of sight of the castle on your property is most likely impossible as well. I'm not 100% sure about this, but my guess is that the presence of the castle might even devalue the land in a lot of these cases, ie you would pay more for an equivalent amount of "empty" land.
There's an interesting case going on right now; while not a castle, an 'old' royal palace has been sold to a developer and they're considering turning it into an event center with a hotel and apartments nearby (https://translate.google.com/translate?sl=nl&tl=en&u=https%3...)
