But it doesn't. It simply says "he must place it on a spot within (specify area, e.g., six inches, one club-length, etc.) of and not nearer the hole than where it originally lay, that is not in a hazard and not on a putting green"
Some years ago I received this reply from the R&A
"If there's an LI or a movable obstruction within the distance, the player may place the ball on it."
The question came up in a discussion at one of the rules workshops I attended, with the same answer. As long as you are placing the ball within the prescribed limits, there is no restriction as to what the ball may be placed on.
If I have any issue with the process at all, it's with that local rule in general. It's the only time I can think of under the rules where the player gets to pick a spot to place the ball on. In all other such procedures, the ball must be placed on a specific spot - such as the spot from which it was lifted, or the spot where it first hit the course when dropped.
I've always thought that the PGA Tour was much too liberal in invoking this LR, and much too loose in allowing one clublength for the placement area. My men's club only invoked the preferred lies local rule if the course was truly a mess, or if we played a tournament within a week after fairway aeration. Just because the course was a bit soft wasn't sufficient justification (mud balls were just considered part of the game - learn to deal with it). On the very rare occasions when the rule was in play, we got one scorecard width (about a 5 inch semicircle) from the spot where the ball came to rest.