I also do not like the sitters hand being live when they are all in, I know it is usually just one bb but I have seen them win time and time again with rags and it is frustrating. There was a site that would boot you from a tourney when you sat out for 20 straight hands, or maybe it was 20 bb's, I don't remember that either but I know they were ejected from the tourney. I forget which one it was. I liked that rule. Sitting out can be an effective strategy in some situations so I am not against the practice, but I seem to see a lot of people who will push all in on the first hand or two with crap, win a huge pot and then sit out for considerable periods of time. I don't think this is a good strategy, but hey, whatever works for that person. I also see it a lot right before the bubble, people sit on their above small up to even above medium stacks just hoping that they have enough to make it to the money. It starts when there are 10-15 people left in a tourney. I find this a great time to add to my stack (or bust out and get them closer to their goal...which has been the case a lot lately..ha..maybe I should employ their strategy).
Live play, you are correct that the hand is mucked when it gets to them. They are dealt the cards. I have never been in a situation where there has been someone sitting out and their last BB is in play so I am going to trust that everyone else knows the applicable rule. I would find this very odd in live play though, but there are other rules that piss me off just as much. In live play, if a player walks away from the table, his hand is supposed to be mucked. I was in a situation where I was in the BB, a guy had min raised from UTG+1 and it was folded around to the button, who called and I also called with Qs9s. The flop came Ks Jd 8s. UTG+1 put in a half pot bet, it was called by the button and I also called, the turn was As. UTG+1 bet half pot, button pushed all in, I called and UTG+1 called. We turn over the cards and UTG+1 has J8, Button has K 10 and I have the nut flush. UTG+1 curses, says he didn't even see the flush and then walks away and the dealer turns the river and it's another 8. He quickly came back for his chips. Should have been a dead hand. I know we see it alot on TV but the rule is that if you walk away from the table, your hand is dead.
I don't really have a point to make, maybe, there are always going to be frustrating things in life. Don't let it get to you.