This is the way I understand the function of the 727.
You have 2 scenarios:
1. Gear shifter is in manual low (L)
2. Gear shifter is in D, first/low gear is active.

In case 1 the low band apply protects/locks the sprag, while in case 2 the sprag is active (no low band apply).

I believe the danger in case 2 is that while doing a burn out in low gear (shifter in D) a slight disturbance in the engine (like hitting the rev limit, misfire, fuel problem, or pedal the throttle) will/may cause the sprag to start free wheeling...and now a moment later when/if the full engine power is restored, the sprag will, with full power, slam back into locked position, and this causes a huge load on the sprag, and may destroy it.

So, never a burnout with the shifter in the D-position. A burnout in manual low (L) is a lot safer, if I understand things correctly.