Very little of what you are describing is a relevant problem in competitive online games. It's all about cheats that make it appear that someone is simply a very skilled player.
High level cheating involves minimally noticeable aimbots or wallhacks of some kind (for a MOBA this would be fog removal). Being able to see enemy cooldowns, scripting combos.
What you're describing would do nothing for the vast majority of online cheating.
High level cheating isn't a problem, I mean maybe it is at a high level but for general consumer seeing a character zipping around in the air and then blasting them with a shotgun from across the map is what makes them feel like crap. A player who just looks like a good player doesn't destroy the experience, you just lose to what seems to be a better player.
Most game devs seem to agree with you. It's not like my idea is revolutionary, but you can go far beyond the physics/rules in most multiplayer games I've played.
Slightly different example but as far as a constructive approach to incarceration goes schemes like this will always be a net positive. Far cheaper than locking people up.
High level cheating involves minimally noticeable aimbots or wallhacks of some kind (for a MOBA this would be fog removal). Being able to see enemy cooldowns, scripting combos.
What you're describing would do nothing for the vast majority of online cheating.