FL
To answer your question, I'd have to give one of my most frequent replies - it depends. My personal feeling is that advice should always be the first [and second, even third] option, and if a cop rings our ASU I would always try and steer the discussion in that direction. Coming down heavy on an oversight or an error of judgement isn't the way people learn.
If someone is deliberately doing something absolutely outrageous, or persisting in something less serious but where they've ignored repeated advice, then perhaps more formal action is justified. The problem with the CAA approach is as you say pursuing the easy targets rather than those wilfully cutting too many corners. Hopefully my replies so far show that I prefer the educating route, but what do you do with those who simply won't listen?
I know that for many a commercial operator it can be tempting to say "..well if you interpret it this way...." because it is after all a living. As has been said on similar threads, although we should - and usually do - stand by each other as aviators, every now and then there crops up a case where things have gone far enough beyond the pale to do something about it. I don't think it being a fellow pilot should come into it.
Just out of interest, I've only once in fifteen years of police work been involved as a witness in a CAA prosection. The other guy was accused of charging without an AOC, recklessness, negligence.
I'm no legal expert but to me the CAA case was very poorly prepared and in court I wasn't asked anything of proper relevance. Consequently the guy was acquitted of four out of five charges and I was left feeling pretty frustrated, though not as aggrieved as his passengers who'd paid good money to end up with a wide and interesting variety of injuries on a foggy hillside.