As for the 7 year old girl scenario, I would not sacrifice my 7 yr old for the sake of curing cancer. Nor would I sacrifice a 7 yr old girl I do not know. No parent would. It's that simple.
I understand what you are saying, but that is because you are letting emotion overpower reason. You are right though, I personally wouldn't sacrifice my 7 year old daughter. However, that would be because I would let emotion cloud my judgement. Killing the 7 year old child is still the right thing to do, even if you can't bring yourself to do it. If you don't kill the 7 year old child, even the one you don't know, then you are essentially responsible for every single person that dies from cancer. You are responsible for the mother of three with breast cancer passing away. You are responsible for the 4 year old with lung cancer that passes away mere hours before his fifth birthday. You are responsible for all of them because you let emotion over power you. There is a reason we don't let families of victims decide the punishment for criminals. There is a reason we don't let doctors operate on loved ones. This reason is emotion. It prevents you from acting in the "right" way. The right thing to do would be to kill the child. Yes, it is hard to accept, but doing the right thing isn't always meant to be easy.
As for your objection to prisoners working, I think Yoda meant (I'm assuming) that the prisoners would work within the prison enviornment and not out in the community where, as you so rightly noted, there is an increased risk of escape and additional crimes.
Why should they work in the prison environment? Who does that benefit? What possible gain is there for society?
In relation to your story about the children in the playground, I understand that environment plays a huge role in making us who we are. But that does not mean that we should not be held accountable for our actions. As you rightly predicted, "We can't ignore every murder because ever murderer has a bad upbringing". I realise that life is hard for some people, and even harder for others. But let me try give you an analogy:
Imagine that you own a factory. You are the manager of it in every way, shape or form. Your factory produces T-shirts of various colours and designs. You have recently purchased the best T-shirt making machine available on the market. The quality of some of the shirts are superb! But unfortunately, once in every 100 shirts the shirt has a small rip in it or has been shredded completely. You've investigated the problem and have found that sometimes the material of the shirts are just weaker and so tear more easily, and sometimes the labels on the shirts get caught in the machine causing rips. There is nothing you can do to stop the ripping. Unfortunately, the people buying your shirts are getting upset that they sometimes receive bad shirts. You need to find a solution to the problem. Do you just do nothing and let the bad shirts get shipped out to stores along with the good ones? Do you try and sew the rips back together and hope the people buying them don't notice? Or do you do the responsible thing and throw away the damaged shirts? You could recycle the shirts or burn them, I don't think it matters, but at the end of the day you need to remove the damaged shirts from shipment, even though it is not the shirt's fault that it tore.