FED Rules- Runner hit by fair batted ball???

[ctblu40]

The example that was given (after I questioned this ruling) was as follows:

SITUATION: R1, R3, less than 2 outs. Infield playing in. Ground ball batted toward F4, goes thru F4's legs and hits advancing R1 immediatelt in back of fielder. As soon as R3 see ball pass F4, he advances toward home plate.

RULING: Ball declared immediately dead. R1 to second, BR to first and R3 back to third (base occupied at the time of the dead ball).

My contention is, 1) why is the ball dead? 2) why is R3 returned to third? It seems as though this penalizes the offense because the defense couldn't make the play?