The ocean/firth left on holes #9 & #11 at Royal Dornoch are red-staked as lateral hazards. The 3rd, 4th & 5th holes playing along the beach at Golspie are also red-staked. My understanding is that lateral hazards, as the rules are now written, must be water hazards.
I agree that the stroke & distance penalty for OB seems severe. You could probably say the same for a lost ball, especially when everyone in the playing group can see where the ball went, but cannot be found.