Not only do they think that thinking of doing a negative or non-virtuous action is as bad as doing it itself

This is about dealing with the heart which also makes alot of sense. It reaffirms or decides many lines that would otherwise be hazy. EX: cursing, swearing, etc. Swearing is not considered a sin because you say a certain word or phrase. Another word or phrase can easily be substituted. "Crap" for "shit", "freaking" for "fuck", "slut" or other words for "bitch", and much more. What makes it a sin is the heart behind the words. Many times you curse because you're mad, you're trying to degrade a person (many examples on this site), or something like this.

every sin no matter how small demands unlimited punishment which is just ridiculous

I believe you are referring to hell? People are not sent to hell for a finite sin. People are sent to hell for rejection of God or the disbelief in God. Not enough evidence you say? Romans 1:18-23 says otherwise. An example of this is how the Big Bang Theory originated. Unknown to many, the idea was originally thought of by a Belgian priest and was applauded by Albert Einstein on his work in the 1930's. Alexander Friedman came along and tried to twist it to his own uses disregarding the priest and the reason it was idealized (an explanation of creation in Genesis 1).

What you feel in this life does not matter. How you feel in the afterlife, is what matters... because what's a couple of decades, compared to the eternal?