I don't remember being punished for bad handwriting, but I know I got chided for it a lot. And I know we spent a lot of time on it. It definitely sucked, at every level of the experience.
I also find it odd that people have some off assertions on why we learn cursive. I'm sure there is a multitude of reasons, but I find it hard to think it has any strong advantage over other ways.
I do get a kick out of my kids being baffled that I write in cursive. At this point, I think I get as much fun out of that as I do anything else.