I'll throw in my two cents on this.
The nepotism: You do realize that nepotism is only of concern in a society that can't prove if a promotion is due to ability or relations, right? It becomes completely moot in one that has ways of identifying which one is the reason for the promotion. Considering the sheer amount of information and direct observation available to the TSAB, I think they can tell which is which. And by promotion, I also mean favoritism as well. Just used the most obvious example of favoritism.
Next point, the Arthra was actually in the area of Earth trying to find out what happened to the transport ship; Yuuno just managed to get there first. Keep in mind, it takes a lot more time to get a ship from TSAB Headquarters to near-Earth dimensional space than it is for one strong mage to long-distance transport him/her self. The reason they didn't get involved until Nanoha and Fate's fourth clash over the Jewel Seeds is because they didn't get there until then! And Chrono immediately moved at prevent the very same thing that happened the last time those two girls fought over a Seed i.e. the damn thing going nuts. By the way, they come right out and say they detected the previous Seed going nuts.
As mentioned, Nanoha, Yuuno, and Fate were never pressured into joining the TSAB. Lindy asked for Nanoha and Yuuno's help, and made it a point to encourage them to take a little time to make their decision. They both agreed to help, because that's the kind of characters they are; you know, heroes. Fate joined due to her lingering feelings of guilt, and because she believed it the fastest way to meet Nanoha again.
Oh, and Fate was only imprisoned until they got to Mid-Childa; which isn't some bizarrely cruel thing to do. She was, after all, guilty of pursuing a dangerous Lost Logia, so I'm assuming it was SOP; much like the way police officers in my city aren't allowed to have anyone in the back of their patrol car unless cuffed. I'm not sure if she was acquitted or allowed to commute her 'sentence' as community service in the TSAB; what I am certain of is what happened to Hayate. She chose service as a way to repay the harm her 'children' caused.
Those that have read the 'Most hated Character' thread know my opinion of Gil Graham. Looking back, I can say that he really was trying to do the best he could. I can honestly say that I really don't think he had an true malice in what he did. Also, take a look at that last episode, particularly the epilogue. It's set fives years later, and yet he looks like he's aged ten or twenty. As the son of retired military, I can tell you it takes more than fives years for someone that's spent all their adult life in a regimented lifestyle to get to the shaggy, slumped look Gil sports when he and his familiars are looking at photos and a letter from Hayate. He looks broken. His beard is a mess, as is his hair. He's slump-shouldered and looks like he's not trying to live all that hard. He retired, but we don't know just what happened behind closed doors. Hell, his 'retirement' might have been a forced resignation with it being made very clear that he was only technically free, and only because things worked out in the end.
Now, do I agree with that approach? No, but the TSAB seems to be focused on rehabilitation rather than punishment; they seem inclined to be more forgiving when the guilty are honestly remorseful. The reason Jail, Quatro, Uno, Tre, and Sette are imprisoned is due to them either not showing any remorse, or in the case of Sette loyalty to Tre.
I will say that there are signs of corruption in the TSAB, but not any more than any other large organization; point to any big-city (and quite a few small-city!) police forces and you'll find corrupt cops, jerkasses, and abusive types. Does that mean all cops are bad? Uh, no.
That's all I'll say on this.