Jason--
Your anecdote about the Seekers of the Sacred Sideslope is great, and I think it underscores an important point: that part of what makes golf great is that it can be fun even when played non-competitively.
Was your fivesome embroiled in a match, and there were any stakes on it? If so, then it sounds like they might not have been entirely "playing to win" on that particular hole. I would suggest that the desire to hit a certain shot in order to watch the ball kick and roll a certain way overtook their desire to play the hole in as few strokes as possible, period.
If there was no kind of match going on, though, I'm inclined to say that playing the hole that way was neither smart nor stupid. Hitting a golf ball with no competitive context is really just a strange form of performance art, so anything goes.
Both approaches are okay, of course - it just shows how golf can be different things to different people.
~ ~ ~
Now, if we're talking about the competitive form of golf (from someone playing by himself/herself but keeping score, i.e. competing against Old Man Par, all the way up to major championships), I think there are a lot of otherwise intelligent people who nevertheless have a tremendous capacity to play stupid/foolish golf. In my years of playing golf with lots of people, I can't tell you how many times I saw people try to pull off shots that they had no business trying. And this includes very intelligent people who, if they behaved that way in business, would be in big trouble.
Now, it may be the case that for some people, golf is attractive because it provides a context to be reckless and foolish in a safe way (take a stupid risk in golf and all you lose is a shot or a golf ball), which I can understand. In those people's cases, we probably have to be more generous when we ask about how smartly they're playing.
FWIW, in some tournament golf this summer, I really concentrated on playing very conservatively most of the time, trying to out-think my competition because I know I couldn't flat-out outplay them. I had some modest success with this approach, which required me to hit more fairway woods off tees and lay up on more par fives than I normally might. When I noticed that I shot some decent scores despite playing fairly mediocre golf, I felt as though I had played pretty smartly.
It's hard, though! The way in which golfers goad themselves into being foolish is the push-pull that makes the game so endlessly interesting, to me.
The pro game is another animal, because the talent that all of those guys possess, especially around the greens, enables them to play in a way that would be totally idiotic for most golfers.