Andrew Gideon wrote:

But I have never heard of this before. I wonder how well this
long-standing policy handles subtleties like a VFR flight in an aircraft
with a too-quickly precessing DG. And what are the possible sanctions?

I can tell you I've told ATC of a number of problems while VFR (some
within class B) and never heard anything about it including:

1. inoperative transponder
2. total electrical failure
3. smell of smoke in the cockpit
4. plugged static system