It's a bit ridiculous that level 3 prisoners are selling level 9 items.
It is. In the first place , where are those items come from ? Maby an underground
heroin dwarf factory.
For the proper feel of prison, weapons should be limited to hand crafted improvised weapons. *wink wink * good time when introduce craft to a player. Proper equipment should be available by kill guards or by story as a Statue_with_a_spear. Enemies, of course need fit the difficulty, NPC are need to redo do to AI 2.0 anyway.