I've been playing other games (higher quality of RP in NWN worlds, god forbid I bring ideas back from what makes it good to RP there) with full pvp and pickpocketing implemented quite well.  Here are a few things that prevent what is known as wtfpwning, or running up and killing someone without previous RP or an OOC warning in tells that their character could be assassinated at any given time.

First off, a very broad rule, called the "Be nice" rule.  Here's a general excerpt from it's text, it's a useful rule that most abide by there, and it solves many PvP problems (written by a DM):

This doesn't mean you have to play a good-aligned character, donate to the local plague shelter, and drink from teacups with your little finger curled. We do, however, expect players to interact with each other, the server, and the community, with a certain degree of civilization, courtesy, and respect.

Personal Interactions: Rudeness for its own sake, blatant sexual reference or repeated innuendo, and harassment are not allowed. If another player or a DM asks you to leave them alone, or to cease a harassing or offensive behavior, and you persist, you will be dealt with at the DM's discretion. If someone else is harassing you, first let them know that they are being annoying and/or offensive (civily, please) and ask them to stop. If they don't stop, then take a screenshot of your chat window for evidence, and notify the DMs. Cussing in modern vernacular, including modern racial slurs, is likewise forbidden, as it is poor RP and offensive to boot.

Secondly, a "no excessive theft" rule.  Basically, don't steal things from the same person more then once in a 24 hour period, and pickpocket has a cool down time to prevent rampant pickpocketing.  It allows for pickpocketing and  thievery without griefing (this applies to one successful pickpocket from the player).  It wouldn't be too hard to write a script that checks, before pickpocketing, to make sure that you haven't successfully stolen anything in the last 24 hours from that person, and while pickpocketing prevents the stealing of quest/unique (gm event) items.  This way, nobody would lose something huge, and it would be all good.  (The Arelith rules are actually 1-3 pickpockets, although the guideline is 1, and if you do more then 3, you're in trouble).

Thirdly, a PvP cooldown time, and requirement for RP previously.  To quote it:

Player vs. Player battles, and player killing MUST have an RP reason supporting the conflict, and the incident. "Because my character is chaotic evil," is not reason enough. Being chaotic evil is not the same as being a certified psychopath, and psychopaths get themselves removed from society anyway, which, incidentally, is exactly what will happen to a character or player who chooses to act like one. Be sane and pick your battles. Challanging someone to mortal combat just because they called you a big old bed-wetting doody-head is ridiculous.

On the other hand, PvP is quite allowed. Don't be surprised if, after you've annoyed the nine hells out of someone who can wipe the floor with you, we rule your resulting death as "suicide."

24 Hour Rule: If you engage in a PvP conflict with someone, and either of you dies, do not interact with the other character for 24 Real Life hours. You may run into each other by accident, but in that case, it's the responsibility of the one who lost the conflict to quickly and quietly be somewhere else. This helps with the RP that someone did, in fact, die, and takes them out of the conflict for a while, without forcing anything as drastic as a permadeath on any player. It also gives everyone a chance to cool off a little, and avoid the nasty little scenario where the dead person immediately comes back for revenge, someone dies, they come back, wash, rinse, repeat. We highly encourage you to resist the desire to rush right back in to "finish business." Each player will be held accountable for their own actions in such matters.

The 24-hour rule applies to group conflicts as well. Regardless of who struck the blows, if the PvP event involved groups and/or sides, then any and all individuals involved in the incident must abide by the no-interaction-for-24-hours rule.

With exceptions made for dueling (requiring entirely consensual PvP sounds more like practicing or fighting nonlethally, which could be engineered to be pvp without death, where, if dueling, when one player dies, they're brought to 1hp and the duel is over, a winner declared), this could be made mandatory by putting both the killer and the killed on mandatory ignore, with a 24 hour timeout.  Certain filter scripts could catch the most blatant abusers of PvP without rp, and other filters could make sure that excessive PvP (killing lots of people, as the aggressor, without a guild war going on) could be flagged, and, if necessary, dealt with.  Also, new players could have a no-PvP tag for a certain number of hours of gameplay, until they got used to the game.  Also, there would be harsh punishments for attacking people inside the cities (engineered into the factions system?, perhaps only if a guard saw you, etc.).  Jailing scripts would be good (perhaps with a fine, or *x* ingame days in jail?  Perhaps putting a character out of commission for a realtime week, and in the  case of excessive murders, make the permadeath of a character public (put their heads somewhere, or the like) as warnings to other players.

Personally, I've seen these rules work well at keeping OOC PvP down to a minimum, and work well.  They'd obviously need some changes to fit into PS, but they'd probably be good places to start from as far as keeping abuse of these to a minimum.

(To those who are interested, the rules are from the persistent NWN world Arelith, and the rest of them can be found at arelith.com, and I claim no authorship of them.  This is me bringing things that have worked elsewhere and showing them, not creating new rules off the top of my head.  If these things have all been suggested before, then my apologies for making you read them again, I didn't see them on the page, and consider it more of a compilation then anything else.)

(Enforcement of these would be with the ban stick, of course)