I'd prefer a mix between half the villains dying and half being sent to Arkham. You can't just have 100% of the villains be sent to prison. These superhero film series last a trilogy, more or less.This isn't a television show nor a comic book, it's not on-going. While I'm sure The Joker won't die in TDK, having every villain being sent to Arkham at the end of every Batman film would be a terrible idea.
You've got to have some kind of closure, and sending everyone to Arkham just doesn't do it like it does in a comic book, which will never end. But as I said, I still prefer a mix of half the villains dying and half being sent away, or even open ended deaths. Schumacher didn't kill any villains and we see how that went. In Begins, Ra's died(in an open ended death) and Scarecrow has yet to be apprehended, that's great. But what if at the end of Batman 3, the end of the trilogy, there was just a villain on the loose with no conclusion. It worked for Begins because it was the first film.
Edit: I believe Scarecrow may(or may not) survive TDK, but in Part 3 I see Two-Face being killed. And Joker surviving TDK and Batman 3.