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If this becomes an item it should only be effective for a limited time (like the items that get destroyed after X rounds of use or destroyed on next reset).

If you make such an item i like the idea of it beeing a cominable one which needs an alchemy (some kind of magic suppressing substance) and a tinkering (some special shackels). The resources for the item should be very rare and only findable in one location each.

The idea behind this is that whoever want such a shackle needs not only a tinker and a alchemist that are willing to make one part each, but also need the resource. Having the resources come from only two known location, could allow players of the opposing faction to defend these loaction to either secure or deny acces to the resources.

Just my thoughts on how to make this whole disabeling thing abit more dynamic and engaging.

You totaly disregard critical threat ranges, which in my opinion are a far more acurate way to represent lethality.
Besides that, if we equal damage to cutting power, try chopping wood with a "greatsword".

And yeah dont bring up realism in fantasy games... thats just will lead to silly things..

I think such interaction is much more complex and depends on numerous factors:
What order does the paladin belong to?
What are the crimes of the evil character?
Which relationship have the two?
Do the acts of the Evil character break any laws?

I can think of multiple scenarios where an evil character could be toleratated by a paladin.

you could just commit personally to ending a PC after it dies once or X times.

This is what I am doing, after it's second death i delete the character.
Might be the reason i am stuck playing level 5 Character no one even knows.