Yes you use the penalty, and yes you should prevent it if you can, just like any other "substitution"

Just be aware that knowledgeable coaches may burn a re-entry and sub and send the wrong courtesy runner out as a pinch runner in certain situations. The will usually tell you that it's a pinch runner. If the coach sends out the wrong runner you can tell them that he can't courtesy run. Opinions differ about whether you can point out the ability to PR to the coach. Since this is a new thing in your area it might be acceptable

That is what I keep telling MTD, Jr., when I request a Courtesy Base Umpire for myself when he is behind the Plate, :p.

MTD, Sr.

Softball umpire here. The easiest way I have found to manage the lineup card with courtesy runners is to note it next to the subs name at the bottom of the lineup card. That way it is an easy check to see if that particular player has already been used in the game or not and does not put unneeded information up in the active players section. I simply use CC for courtesy catcher, or CP for courtesy pitcher followed by a number for the inning they were used.

I have a small card I developed to help me keep up with trips (off and def), substitutes, and courtesy runners. I have tried to insert a jpg, but I apparently don't know how.