Intruder:
Please provide a reference for context definition of the term "lateral guidance" in par. 8.b, as well as "lateral navigation" in 8.c.
I recommend you contact the department that wrote AC 90-108. I am not going to debate with you an official FAA document, which everyone involved in IFR operations in the U.S. accepts, understands, and has used and related preceding documents ever since the FAA first authorized the substitution of suitable RNAV navigation equipment for DME.
To me, in context, "lateral" means in the XY plane, as opposed to vertical (Z axis). RNAV includes lateral and vertical guidance/navigation (LNAV and VNAV), and LNAV or lateral guidance/navigation includes azimuth and distance.
I accept that is what it means to you.
I have trouble resolving that, in context, "lateral" means side-to-side or Y axis (or LOC, as you noted) movement, as opposed to longitudinal (or DME to a straight-ahead NAVAID) guidance. After all, DME/DME or GPS or WAAS updating requirements of par. 11 provide provide primarily "lateral" (XY plane), as opposed to vertical, updating.
Again, I recommend you contact the FAA department that wrote AC 90-108.