The issue is that current punishments are generally ad hoc. Similar punishments have been handed out for drastically different offenses and similar offenses have merited drastically different punishments.
Without a way to differentiate the "misdemeanor" from the "felony," progressive punishments won't really work out. There's no meaningful standard. For example, many puller errors in VP are often punished with the "suspension" of a single dragon which is actually a simple recognition of "your puller messed up, so drop it" yet the language of "suspension" makes you think that the rules were violated with ill intent. Other times, puller error results in out-and-out suspension. The same is also true for intentional violations; the inconsistent standard applies there as well.
Regarding toolshed's proposal, I think the community overall, including Class C, would welcome it if the proper procedures were in place to make the process more consistent, more efficient, easier to understand, fairer, and more public.
Public raid petitions would perhaps go hand-in-hand with this type of system.