WGTicon:
Paul,
Yes it is correct according to the rules. it has to do where your ball went in the water at a straight line back. This thread a few month ago discussed this in depth.
-wgticon
As someone else posted, your knowledge of the rules of golf need some brushing up on. You can re-hit from the original spot, or take a drop on a line from the hazard as far back as you want.
Dropping into an un-playable lie is NOT part of the rules of golf.