Of course the chord exists, Paul Simon played it. The reason he wrote it down the way he did was to emphasize the C in the chord as the root note. I always take the extra notes as passing tones, and just deal with it.
Guitarists regularly do things that they can't necessarily justify on paper.
I have heard a m2 interval played in a song without "adequate justification" and it sounded very good. It had that atmospheric sound everyone's talking about.
The idea of replacing a Bm7 chord with a D maj chord really turns my stomach. That was written by someone who either doesn't understand true the nature of guitar music, or was talking down to his or her audience.
I feel very strongly about very few things. Guitar chords are written to tell you what note to emphasize within that chord. Fsus7 doesn't work because you've got the wrong root note in there. It must be based on C.
The song was written to emphasize a mini-scale of four notes, descending. Concentrate on that.