Good point, though i am surprised that they exempt PWCs from all aspects of the USCG; some obviously do not apply, but other parts (e.g. Ventilation, flame arresters, tank pressure testing, and fuel lines) seen to be basic safety items for in-hull applications.
With respect to inspections, I too have never had been inspected; however my brother got dinged on a private lake here in IL by the DNR for some trivial stuff; they kicked him off the lake. I guess it is like any regulatory body, they have enforcement discretion, which gives them the ability to overlook or overstep their assigned responsibilities based upon whether they like you or not.