Can you cite a source for that interpretation? The language you cited clearly states otherwise.
"Every vessel shall at all times maintain a proper lookout by sight and hearing as well as by all available means appropriate in the prevailing circumstances and conditions so as to make a full appraisal of the situation and of the risk of collision."
The language does not say a man must be topside at all times and making constant sweeps ... It says 'proper lookout' ... by 'means appropriate' ... in 'prevailing circumstances' ... to make a 'full appraisal'. That is not a very specific statement ... it is, in fact, a rather vague statement with a lot of 'qualifiers'. The term 'lookout' isn't even defined by the rules. I would argue that the language does not clearly state otherwise ... but states just what it says.
The effects that you mentioned ... sea state, visibility, etc ... would fall into 'prevailing circumstances' category. A lookout who misses a mast on the horizon ... simply due to inattention ... is certainly not a sufficient lookout to satisfy the rule. 'Full appraisal' requires sufficient thought into your watch standing that no new data, within reason, can be expected between log sets. If vessels that you can reasonably expect to encounter can't become visible and then strike you in 10 minutes ... then you certainly don't need to be scanning every 2 minutes.
Post whatever sort of look-out you wish for whichever concerns you have. The point is ... continuous visual scanning of the horizon is not required by this rule and isn't certain to improve safety. I would argue that a purposeful and directed full scan of the horizon at a set interval is much more likely to fully appraise the situation than a man lounging in the cockpit 'keeping an eye on things' will. If your concern is with 40 knot freighters in the middle of the Atlantic ... then modify the look interval accordingly. If your concern is with a planing-hull power boat in the middle of the Atlantic planing along at 40 knots ... I mean, really? I would say expecting power boat traffic would put you into the nearshore category which is a situation I addressed. Or ... it can fall into the 'proper lookout by hearing' portion which I have not addressed.
Naval vessels ... we post constant lookouts and man 'bridge-to-bridge' radios. I seriously doubt you will be struck by a cruiser in the middle of the ocean in conditions of excellent visibility. The predominant risk of collision you have in the open ocean is with large, slow moving freighters ... they do not always post look-outs, monitor their radio, transmit AIS, or closely evaluate their own radar screens ... they are literally on autopilot. What we are talking about is reasonable, sustainable watch keeping.
This concept of 'look intervals' is used heavily in submarines (in high traffic areas). It works. My assumptions were for example. Use whatever assumptions you wish based on what concerns you. If you're never going to see a 100ft MHH, 30kt freighter where you're operating at though ... then you'll just be overworking yourself and risking collision due to complacency or fatigue. If you're in 20ft seas and are still assuming you can see the horizon ... then you're incorrect and the technique hasn't been implemented appropriately.
In conclusion, this isn't a set it and forget it strategy. It must be continuously reevaluated for its appropriateness. The objections you raise are certainly conditions which require evaluation as well.