A little perspective from a wheelchair shooter that has to deal with this. I'm out there to compete, not just have fun. That being said, I'm not worried about fair, as much as I am getting it competitive and right.
My biggest issue is that it is not standardized from match to match. I always try to get the MD to give me a penalty. I do not believe at all that they should be able to just waive the procedural just because I'm handicapped. It's not fair to the other competitors, and I feel like they are just taking pity on me because I'm in a wheelchair. It's very belittling. I would strongly urge taking that option out of the rule book completely. It should also be clear that it is only there for when it's needed, not to take advantage and game the system.
At my level though (M and GM times on most stages) I also believe 3 seconds is too much. I have looked at video, talked to top shooters, taken splits, and looked at my times vs top times, crunched the percentages, and it's way too much. 1.5 seconds is much closer to realistic, but that's not enough for D and C class shooters either. You would almost have to have a different penalty for each level of classification, but that would be a pain for the score keepers to track. It would be the closest to parity you can get though.
Basically, it is not possible to come up with a single penalty that correctly addresses all skill levels. The only way to even it out is take the movement out of Outer Limits which will make 50% of the shooters happy, and piss off the other 50%. That being said, I'm all for it so I can truly measure myself against the best. When I want to move around and shoot, I go to a USPSA match...