Hmmm this system sounds familiar and one of the big reasons I quit=P
If you think about it region protects chests so only members can open it, so by default that reduces your threats to only those within, IE your own members stealing. LWC can cure this, or doing a child region on each plot and then changing owner of the plots (which is what I do/did) problem solved on a local level.
As for PVP it would CERTAINLY cure the "omg you killed me inside my rings but underground" -- which happens to be a LOT of points of contention, if I was able to kill you, then who's fault is it? -- Hint its your town owner -- who didn't do regions right. Had that problem in Artemis once. As a Villain it REALLY sucks to have to check XY on a theoretical ring, you might not be able to see, cause you're underground, and its night, and the ring is made of smoothstone, cause if your calculations are off, you will get banned. -- On the otherhand, if I attack someone and it says "You're in a pvp protected area" -- oh hey, I guess I know where I am. Its so SIMPLE I don't know why its even a discussion.
As long as you amended the the region guide to better explain how all this works, its a great start to reduction in mod work, no more "waaaaaah someone killed me in my ring" or ... "OMG I GOT STOLEN FROM! in my personal chest" IMHO you should be placing more responsibility on the mayors, and less on the mods/admins, they're overworked policing griefing and stealing complaints in the wild, and answering dumb questions as it is. =P
It would also draw players to towns with smarter more organized members, since its likely their protections would be RIGHT. A sort of natural selection.
Anyway, figured I'd chime in. (but out of respect I did not vote)