I have probably missed something obvious, but I ask regardless.
Regarding the Spec. LR (SLR 1 App.1 Pt. B) pertaining to playing a provisional ball under 26-1, the SLR states:
”...If the original ball is found in the WH the player may either play the original ball as it lies or continue with the ball played provisionally under Rule 26-1…...”

1. Why does the SLR deny the player the right to play under one of the 26-1 options if there is KVC that the original ball is in the WH? (Is it because the ball is actually played provisionally under 26-1a? Or because it is the very essence of the PB, play the OB if you find it in play, or play the PB?)

2. Would a LR be valid if that option was included?

You have not missed anything.

The essence of the Local Rule is to make life easier for the player; the player is with the Local Rule given a rare choice between 2 balls, but he is limited to play the original ball as it lies.

A Local Rule saying anything else would be illegal.

You didn’t include the first para of the SLR, which says, in essence, that you can play a prov under any of the applicable options under 26-1.

So, before you start to search for the ball, you can decide which option you prefer and then play the provisional accordingly. Then, whether you find the original or not, you have already decided the option and played accordingly if you are not proceeding with the original. You can still play the original out of the hazard if you find it.

The default allowance to play a provisional is in the possibility of your ball being lost outside a hazard or out of bounds. This SLR extends that to water hazards as well.

Why does the SLR deny the player the right to play under one of the 26-1 options if there is KVC that the original ball is in the WH?

It would defeat the purpose of playing a provisional (to save time), if the player was allowed to go back and (again) choose a 26-1 option.

Back is a long way where this Local Rule would be used.