1) NPC's should commit crimes and go to jail. Sometimes they wont get caught, but when they do they are thrown in jail and held for a period of time. Keeps the cells more ambent. Everyone can murder but that doesnt happen often, and the low class will steal a lot to get food. Just for kicks.
2) Sometimes the player will be accused of crimes they didnt commit. Say you and your neighbor dont get along, than an NPC goes into their house to try and steal some money. When your neighbor comes home early, the thief panics and ends up murduring him. You may than be accused of the crime and be put in jail. Thus leading to a quest of vengance and lols. Of corse they cant be scripted quests. It has to just be completely randomly generated.
3) You should have a fair trial! Unless you commit a serious crime (like murduring someone important) you should be put in court where you can plead your case.
4) If put in jail, you should not have to just sleep it out, you should have to wait the days you are there, and only alloud to sleep for 8 hours every 16 hours (a regular day of awakeness). And (most important) when in jail, you should be aloud in the prison courtyard for exercise. Unless your a murdurer who is serving a life sentence, you can go outside when the guards let you. Just for an added escape chance.
5) No more dainty punishments!!! If i murder someone i shouldnt be able to pay a $200 fine and walk away! Thats life in jail! And paying a fine is not an option! You either start a new game, play the crime off on some other NPC, die in jail, or escape!
All this is just for some excitement and realism in the game. Good characters have a reason to be good (they can be given the botd with crimes) and evil players now have a reason to avoid guards!