There are of course exceptions for limited-purpose VISAs, usually issued at the border crossing and yes, things can get pretty nasty if the VISA is abused, i.e. used for other purposes than originally intended.
There are still checks at the border and withing single member countries, the chances of being caught are not exactly nil and the consequences are usually pretty unpleasant. Being expelled and banned from a Shengen country usually means being banned from the whole Shengen area.
Ciao,
Dg800