I could accept that "the collars actually are tracking collars" explanation if that actually applied to the restricted areas of Fort Joy. But you can have a picnic in there and no one will come for you. You can wander around, slaughter guards, go back to the prison, and no one cares.
Tracking collars might also be an interesting idea. Say if you leave Fort Joy, each time you level up until your collar is off, a team of level-appropriate guards is dispatched from the drawbridge to hunt you down and kill you. But expecting the game to handle AI wandering across the map well is probably expecting too much of it, especially for combat encounters between AI Magisters and the regular encounters.
The prison has to supply food to the prisoners beyond the fish they find. The question I have is where is it and why don't the Magisters have any of it or even a kitchen?