The system i explained gets used successfully in many games.... howeverThere is no "best way" to fix crime & punishment. Your ideas fall into the bucket of thousands of other ideas with thousands of their own flaws. If it was a simple problem to solve it'd have been solved by now.
The reason it "hasn't been solved" is because the game's economy is busted, and it requires substantial feature development around C&P including a third rework of it's mechanics, and removal of Very Dumb Things™ like the inability to use Anonymity Protocols to dock when you have hostile reputation[1]
tl;dr it's not simple because the rest of the game outside the C&P system is a broken mess. You can't enforce crime where the impact of that crime doesn't have a firm standing in the rest of the game's mechanics... which to the point below:
A single mission will very easily get you to that. Two missions will thereforeget you the max of 10. Then I can run a hundred missions like this and still only have 10 notoriety. That's just numberwang at that point.That system already exists. This player got notoriety level 7. You don't get that by shooting one NPC by accident.
Notoriety also needs to be jurisdictional, not global.
[1] the hint being in the name; anonymity protocols. Incidentally, notoriety can only be gained through crime. Hostile Rep can be gained without a single crime being committed.... so the fact Hostile rep is treated more harshly is really dumb.