Yes, it does seem awful silly to be standing on a sandbar and have the system repeatedly tell you that you can't find any sand when you dig. Kind of like sitting in a lake and unable to procure any water.
I think the key word here is "suitable" sand. Although it does raise the interesting image of my mule standing on the beach inspecting grains of sand one at a time: "No. No. No. No. Oh, here's one.... no. no. no."
I am glad to see they are putting another use for glassworking: I got it for my mule and suddenly realized that, while I'm digging for sand for my potion bottles, I could just kill a PE or two with my main and use the cash to buy thousands of bottles in a fraction of the time...