I think it may come down to notions of whether the purpose of punishment is to rehabillitate the criminal or obtain justice.
The problem with this form of rehabilitation is that the victim may not percieve it as just. You've had loved ones raped and murdered, you've had property you worked hard to obtain stolen or destroyed, you've suffered wrong. And, society proposes to place nothing in the balance against the wrong you've suffered. You've changed the persons mind, but he's still the same person that committed the crime.
Another problem with this form of rehabilitation is that it carries no cost. It's sort of the opposite of deterance. Not only do you not suffer the consequences of having committed a crime, but you recieve a cheap redemption right down to the spiritual level. One can easily imagine a person saying to themselves, "Why don't I engage in evil? Then I will have had my revenge and afterwards, my crime will be expunged by the simple expediency of putting on a helmet and coming out clean again." Not punishing a wrong-doer may be percieved by the larger society as a failure of the social contract, with the result that such non-punishment punishments lead to a rash of vengeance swearing vigilantes. These are reasons lawful socities might shun such an action.
Another potential problem is that it might not turn out to be that effacious once you put it in practice if you don't also change the circumstances of the person. What is to say that time won't win out, and in the long run the same underlying causes that decayed the soul won't decay it again. How long will the revulsion at his former self last, if the same resentments, jealousies, and emotions return? You changed the motives, but not the wisdom. You changed the person, but not the circumstances. Perhaps it has been tried before and discovered not to work, but instead that five or ten years down the line you simply have rapists and murderers out in society who commit thier crimes again. How likely is society to tolerate the expense and risk, if even one of this freed murderers commits the same crime?
Another problem is that you've violated the free will of the invididual - 'Clock Work Orange' indeed. A lawful society might get caught up in the fact that the penalty is not just because he did not pay for his crime, but a chaotic society might consider that it is inherently unjust to remove the beings free will regardless of the intention in doing so. A chaotic society might also eschew this type of rehabilation for the same reason that they would avoid the death penalty - they may think that the consequences of depriving an innocent of his free will are too terrible to consider and too irreversible and therefore err on the side of caution. A chaotic society, with its notion of internal belief and personal intent, might even see such an act as depriving the criminal of the chance to repent of thier crime of thier own free will, and thus of the one chance that they have of true redemption. Perhaps its too easy to assume that the crime is expunged because the motives have changed. Perhaps you've created the horror of an damned soul which by virtue of its changed heart can percieve its inescapable damnation, but cannot do anything about it.
Another problem is it may be that the majority of criminals aren't evil, but neutrals who found themselves at the wrong place, at the wrong time, in the wrong state of mind and who then opted for doing evil as the easier or seemingly more fulfilling path. You might find yourself with alot of murderers you had killed in a moment of passion, who would remain basically the same person after the helm came off thier head.
