This has never been the case, I've been twisting back corners since 2008 and nobody has ever DNF'd me for that. Rule 5b3c is simply a clarification.
The old regulations were very unclear about corner twists. Although not technically outlawed, we had:
5b1) If a competitor chooses to repair the puzzle, then he must only repair the defective pieces, and must not use pieces of other puzzles. Penalty: disqualification of the solve.
5b3) If after repairing the puzzle, but still during the solve, the competitor notices that the puzzle is unsolvable, he may disassemble and assemble max. 3 pieces to make the puzzle solvable again.
These were taken from the 2008 version of the regulations (in essence the same as 2010).
Now 5b1 was clearly written in respect to pieces popping or caps falling off the puzzle. There is no guideline to indicate what should be done if a corner twists. Then 5b3 states that to repair a puzzle (if unsolvable) it must be disassembled and reassembled correctly. Naturally, twisting a corner is not disassembling the puzzle to repair it. I believe this is why I was originally taught by someone in California (I cannot remember who) that corner twisting was illegal, and therefore I enforced it as such.
The new regulations make it clear that corners twists are fine.
So if a mistake happens, it's totally not the fault of the person handling the puzzle? I shall remember that when we talk about removing +2 again.
Darn you Sarah, stop making my life difficult...
*damage control* The rule of thumb that I have always applied is this: If you choose to use a puzzle that is prone to defects such as corner twists or caps falling off etc. etc. then it is the fault of the competitor for using a vulnerable puzzle. Therefore, as Sarah said, unless there is clear proof that a scrambler has deliberately sabotaged a puzzle, it is the competitors responsibility to ensure their puzzle is solvable before starting the timer. If they can show it isn't solvable before starting the timer then it's simple enough to give them a new scramble. If they get into the solve and realise it isn't solvable, then they just have to deal with it.
NOTE: This is the same logic I apply to the +2 rule in response to the "it turned by itself" argument; that is, if your cube is so loose that it can turn by itself upon being placed on the stackmat, then it's the competitors fault for using such a loose cube and then throwing it down to stop the timer.
At the end of the day, people aren't perfect. Although scramblers are meant to ensure every cube has been scrambled perfectly, some things will still be overlooked, such as a twisted corner. These things could be avoided entirely if competitors were more careful about their choice of hardware. While the WCA is in it's current state, everyone has to work together to make things happen. Thus, if a competitor chooses to be difficult and use a cube which is horribly loose and vulnerable to defects, they have to accept responsibility for that choice, and the consequences that could arise from it. When staff start getting paid for their manual labour, then we'll start thinking about perfecting the systems
