Pretty simple, the sand-bagger is cheating his opponent whereas, as annoying as he is, the Hollywood Handicap guy is just cheating himself.
Agreed, with one significant exception; vanity handicaps can really screw up flighted tournaments, both which golfers go into which flights, and, in turn, the results. For instance, if each flight has 8 players, vanity caps push legit guys down a flight, which skews the results.
I’ll add this. In my experience, a lot of the complaints from low indexes who lost to a higher index were vanity caps who aren’t very good when they have to play fully under the Rules. Most of the guys who consistently do well in net comps are just guys who play every round fully under the Rules, and usually for a few dollars. They don’t panic when their ball is in a divot, or they have to take stroke and distance, Orr they have to actually putt out, etc, and they can handle their nerves. Vanity guys can’t do any of that, but they sure can bitch later.