Well, I kinda half agree with you on this one, Jason.
I understand the paying for the advantage argument, but CTTH isn't what we would call a 'realistic' mode of play. By that I mean, you don't walk out to the 5th fairway, drop 1 ball, hit it and leave for #6.
I say that because other suggested features (such as mulligans in practice mode) have been rejected by many players who used the realism argument. It's not realistic to fire 20 balls at your local courses 3rd green, etc etc, thus it shouldn't be available in practice mode.
So, if using realism is an acceptable reason to rule out mulligans, then why does the realism argument not work to rule out lost balls in a non-realistic mode of play?