Ward, I agree that hard doesn't necessarily mean good. But it doesn't necessarily mean bad either.
I prefer to look at tough holes in the context of their routing. If 16 is the only do-or-die hole on the course, I think it's fine and a good dramatic touch toward the end of the round. If every hole were that demanding, it would be too much. I haven't played Victoria National, so I must defer to you there. But if it's only 150-160 from the mortal tees, let's just man up and hit a good shot.
It does sound like someone should make a decision on how to handle the hazard. I agree with you there. I might even agree that it isn't a very good hole, but not just because it's hard and requires a local rule to deal with the water.
Too often on this site we drift into labeling every hard hole "bad." There are a lot of holes that are tough for less skilled players. That's why they're less skilled. I'll bet the Road Hole is damn near impossible for some players, as is the 8th at Pebble, the 12th at Augusta, the 16th at Cypress, and a host of other fantastic holes. 16 at Victoria doesn't look "fantastic," but being difficult doesn't automatically make it bad.
Sometimes I think there are people on this site who'd like every hole to have a 150 yard wide fairway and a 10,000 sq. ft. punchbowl green Stimping at 8 with 12 ft swales throughout. There's room in the world for a demanding hole every once in a while, especially on a course designed with the idea of being a true test of skill and execution like Victoria National.