1) they basically always stay within Ravenloft domains,
“Basically”, so that means not always, right? Sometimes they visit other planes.
2) they have no control over where they go when entering the mists
Assuming this is true, they could end up on the Material Plane unwittingly, right?
“Pretty much”, so that means sometimes they do, right?
no, it simply is a consequence of you coming from wherever and having been sucked into Ravenloft. Because of that you know no one
You use the word
consequence. Does that mean the party being sucked into Ravenloft is the result of a failed check or something and they are now subjected to this memory erasing effect you’ve described? Because, otherwise, I'm not sure what the logic is you're following. Presumably, the PCs know about gods and other beings existing on other planes of existence. How is this different?
it is not arbitrary that you do not know the people on a plane you have never been to, it is not even arbitrary to tell you that about a different continent...
I've never been to continental Europe, but, if you told me I don't know anybody there, you'd be wrong.
As to not knowing what they signed up for, that is not part of this discussion, the question is whether the feature would work, not why the character has it. For one I assume they know this when playing Curse of Strahd, that is on them. For another it might very well have been discussed. All we know is that they are playing CoS and one player chose the Criminal background for some reason.
By "what they're signing up for", I didn't mean choosing their background feature. I meant roleplaying in a game of 5E, which I would think is an underlying assumption of this discussion (although with some of the responses, I'm not so sure) and the rules of which state that roleplaying is, in part, the player deciding what their character thinks. I hope you tell your players beforehand that you will be doing that part of the roleplaying of their characters for them.