I have a couple of things to point out, bearing in mind I have not spent any time in jail and have little familiarity of the rules of being jailed. From what I gather you can't leave the game when in jail, if so, why not? Nearly 9 hours is a lot of time to stay online, can you not just respawn in jail at next sign on?
Secondly, working in jail for a significant amount of time has an incredibly insignificant reward re: reduced jail time. You say that reduced time should be earned (which I'm sure nobody will disagree with) but surely 30 minutes of mining should earn more than 1 minute off of your sentence? Perhaps minute for minute? Or a minute for 30s reduced?
Overall, I'm against a cap on jail time. You should respect life as though it was real according to the rules so killing 3 cops, yeah, that deserves a hefty sentence, but surely the prisoners should have sufficient material to RP in-game while in jail. Maybe be able to play basketball, work to reduce sentencing (fairly), and have further jail time added for dm'ing, etc.
I know prisoner shouldn't offer rewards but there should at least be something to do besides sitting on your hands trying not to annoy a prison officer who will lock you in solitary for no good reason.