In the context of the grandparent rule it is sound. It would not be lawful in Ireland (and one country is all that is needed for this to stand) for a rugby team to have a higher standard for nationality in order to work for them than the president of the country and a plethora of public service positions.
It's why Olympians represent Ireland through the grandparent rule, soccer players, rugby league players, hockey players etc... too. Challenging me on this is unwise without a hell of a lot of research into Irish constitutional law, employment law and nationality law. If world rugby want to abolish the grandparent rule they are going to have to wait until there are no players born before July 2005 still playing the game because anyone born after that date without Irish grandparents is no longer entitled to citizenship, before than it won't stick here.
Membership and employment are very different things. You can refuse a customer for literally any reason you want, it was recently upheld that there was no legal discrimination when a bakery in NI refused to make a wedding cake for a gay couple. There are a list of basis that you can't refuse to employ someone over, sex, ethnicity, sexual orientation etc... nationality is also one of them apart from certain positions, and those positions are then subject to Irish nationality law which I had mentioned previously in context of the grandparent rule. Exceptions also exist, I haven't got examples for Ireland but I know that you can't join certain militaries if you were a member of another regardless of citizenship, exceptions to the rule is what stop players from switching international rugby teams.
I don't think I can explain this more clearly without scanning through textbooks and statutes and I'm doing enough of that in my life right now. If anyone still doesn't think I'm legit I can tell you that I'm 99% sure you're wrong, that 1% is the possibility of an Irish and subsequently European court which is notoriously employee friendly ruling that the IRFU doesn't have to adhere to the same employment laws as every other employer in Ireland.