Well I read through this, and I had the thought that this might be a way to stabilize the economy, if used correctly. Such as the gold/ore mined by the "prison laborers" could be used to put in a treasury sort of thing, and the treasury would grow other ways too. Also, I LOVED the idea of having prison breaks organized, and a whole new prison map. To me, this is a awsome idea, and guards, prison, and the lot should be implemented. Just my two trias there.
P.S. But 300 ore? thats crazy. Maybe if it was a simple offence, just pay your bills and get out, but say you went on a rampage and murdered 10 people, then mining like that. But even if you did, maybe just a trip to the "gallows" and through the DR would work.