Certain Guards could be bribed, yes. Feeling out who might take a bribe is a risky business, be careful.
One would have to be mad to imply the gms would use ooc knowledge against badies. (I can tell you though if you walk around shrouded in a cloak and scoff each time you see a guard you will have more attention than a dubious character would want)
Banishment will only be from a specific city and the fact that others will be banned should create a culture of lawlessness over time. I can see a system where one could earn ones way back into a city. (don't make the mistake of thinking current mechanics will stay forever, such things as disguises, bribes, spells to mask identity etc should be possible in time) Remember the real crime is getting caught. Banishment would not be permanent, but it would be for a substantial period and lengths of time will escalate.
About auto accept I will need to discuss with the gms how this will be handled, I will need to find out of we can review action logs to see if we can differentiate between who initiated a challenge and who was defending themselves... In principle I do not like the idea that having auto accept off is somehow OOC.
There will be a jail (notsoon(tm)), or at least cells. Another Octarchal Decree shall issue forth soon enough to illuminate the crimes worthy of jail time.
Guards will be well nigh impossible to overtake by force, yes.