I am 100 percent in favor of stiffening penalties atm everyone should be well aware this is a cheat.

50% agree and 50% disagree.  Not everyone has experience with RPGs.  A new person might come across the project page on sourceforge, hear about it from a friend or see it in a magazine and want to jump right in without reading the players guide or coming to this forum.  To some people, this may be the first time they've ever even seen an environment that didn't have a pre-determined goal or purpose.  If I typically play games like Medal of Honor or 1503 where I no choice but to go in certain directions and do specific tasks and then I find this game where I have the choice to lay around, mine gold, fight/kill, preach, explore and anything else that you can do in Planeshift, I might find myself looking for ways to simplify certain tasks.
I understand both sides of the argument, if you do something you already know is not allowed, you deserve STIFF penalties.  If you're a knucklehead you deserve to be educated, penalized/punished and put on probation for a while to prevent future occurances.  Since new people will fall somewhere in the range of "expert RPGer" to the complete newbie, I think it's a little extreme to blindly swing the sword at every offense.
I have only had experience with one GM and he was pretty decent, heard my story, educated me a bit and gave me my due punishment based on the facts of the situation.  I wasn't mad at the game, the GMs or anything else except for the fact that I then had to boot into winblows if I wanted to waste time.  The good thing was that I realized I had a lot of cool games that had been forgotten...Yuri's Revenge and MOH rock, baby!