I dunno... I know on the old server we used to do this thing where people that got caught Xraying were sent to another world that was generated almost exactly the same, except that all of the minerals in the world were removed, lol. They were forced to cut down trees and harvest animals for money to buy the materials off of the market.
There were a couple people that stayed, but most got fed up and left after that.
Oh, and they lost all of their stuff in the other worlds too.
I don't personally see a problem with doing that, since the effects of x-raying go beyond just the minerals that are mined. Deaths are avoided, additional minerals are gained faster, more money is earned that's spent on building supplies for houses... the effects are too large to just say "Oh, we're going to take everything you x-rayed for." That doesn't even factor in most of what that stuff went to.
Just my two bits, though.