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Eol and his son are convicted and king Turgon offers them a choice between gondolin and death, with eol choosing death.

Admittedly, your middle Earth may vary and third age elves are wiser and have learned from their earlier first and second age ancestors (or themselves lived through it and learned).

Beregond’s sentence would be death too according to the novels but for Aragorn’s judgement and wisdom - banishment, but to a place of honour in an attempt to keep the spirit and letter of the law.

......... Light robbery gets off with some community service and stealing jewels from the nobles vault lands you maybe a couple years in the town jail. I just can't reconcile an eye for an eye draconian law, or even the death penalty existing within the moral compass of Middle-Earth.

I would broadly agree with the idea that a death penalty was rare. However, Eriador is a place that used to have a King in the dim & distant past. And the Laws of that King. Memory of such times might leave some residual Laws to be followed - yet there will be no way to enforce those laws.
In the case where there are no central authorities to appeal to: each community administers such Law as it wants to and that it can enforce.
On the subject of prisons, I can't see who will pay the expense of maintaining a building with inmates (and a guard etc). Outside life is so harsh & grim at times, being locked up would be a holiday for some!
A jail would therefore only be of value if it was a holding pen for people waiting to be tried and judged. (or for the inmates to sober up before imposing a fine!)

Stealing Jewels from the nobles? If the jewels have been disposed of, then I can only see the hand-chopping punishment OR a long period of thralldom would serve. If they have not been disposed of, simply recovery and a bit of a beating/ pillory/stocks would suffice.

It's worth noting that using long term incarceration.asna punishment was rare. They might do it for noblemen or political enemies to keep them out the way (without incurring the same consequences as just straight up murdering them) or holding them for ransom, but not commonfolk. It was just to expensive to have them not only not working to support themselves and their families, but having to provide them with sustenance as well. Do that for a substantial portion of the population and you'll starve. Prisons existed, but they weren't generally the common punishment.

Punishments were more one-and-done deals. Things like stocks or pillories, fines, corporal punishments like flogging or dismemberment, temporary (or permanent) slavitude, up to exile/banishment for those considered unrehabilitatable.

Bear in mind the setting, Tolkien was keen that certain codes of conduct and mentality would be present. Being free peoples, permanent slavitude would not be a valid option. Even temporary slavitude would be very limited and dressed up (community service, for example, and not in very distressing circumstances either). They were free men, not orcs - such distinctions existed in Tolkien's world, even if not in real life. Permanent disfigurement would also be off the table, I think. Perhaps a redemption quest would be a valid option. While nobility seems to be less of a black and white feature in Tolkien's world (or perhaps it is black and white, it's just not discussed in the books much), certain punishments would only be appropriate for commonfolk - like stocks and pilllories. Nobility would be more likely to get mandatory public shows of apology and fines, stuff that reaffirms their place in the hierarchy while not humiliating them, which would be considered bad for the government as a whole.

......... Light robbery gets off with some community service and stealing jewels from the nobles vault lands you maybe a couple years in the town jail. I just can't reconcile an eye for an eye draconian law, or even the death penalty existing within the moral compass of Middle-Earth.

On the subject of prisons, I can't see who will pay the expense of maintaining a building with inmates (and a guard etc). Outside life is so harsh & grim at times, being locked up would be a holiday for some!
A jail would therefore only be of value if it was a holding pen for people waiting to be tried and judged. (or for the inmates to sober up before imposing a fine!)

Good point, I was thinking very wild west town jailer style instead of an actual prison, which were holding cells. I did like the idea somebody else mentioned of a redemption quest a lot, feels very Tolkien to me. Still a huge risk of death but having to go into the moors and kill a bunch of trolls to clear your name fits a lot better than hanging in the town gallows for me.

Eol and his son are convicted and king Turgon offers them a choice between gondolin and death, with eol choosing death.

Admittedly, your middle Earth may vary and third age elves are wiser and have learned from their earlier first and second age ancestors (or themselves lived through it and learned).

Beregond’s sentence would be death too according to the novels but for Aragorn’s judgement and wisdom - banishment, but to a place of honour in an attempt to keep the spirit and letter of the law.

Gondor is a whole other bag to Eriador IMO, same with the kingdoms of the first age. Eriador is abandoned but is also the home to places such as the Shire and Bree, it's a ragged, barbaric land full of cutthroats but also good people trying their best (excluding Tharbad, which I'd certainly play up the cruelty of). Wheras Gondor is a fallen kingdom blinded by the hubris of their former greatness (with Beregrond's punishment Tolkien present's Aragorn's decision to save him as the just one). In the Lord of the Rings Tolkien presents the killing of man-on-man as a pretty awful thing, even in times of warfare, and even if it's justified. At the best I imagine a straight death sentence would be a necessary evil, and at worst an unjust tyranny.

The rule of the elves of the third age I imagine would vary, in places like Rivendell or Mithlond they're headed by the old and wise, and I think would be very mellow for lighter crimes, and enforce exile for the very worst, which must be a pretty dreadful thing for a high elf. Wheras in Mirkwood it would be much like how we see them in the Hobbit or the first age, far more than willing to let you rot in their cells or put you to death.

This is of course just my interpretation of Middle-Earth, and like you mentioned probably varies a lot from yours! But it's definitely a fascinating thing to think about, what's so great about the One Ring (and MERP before it) is that it puts you in the position to zoom in on these everyday parts of Middle-Earth that never get mentioned in Tolkien's writings.