Maybe you're right. Confession does work just like that for Catholics. For example if you have a Catholic guy who normally does not masturbate (because it is against Church teaching), and then one day he lapses, it is common that in the following days he will find it very difficult to resist constant repetition of the behavior -- basically because his identity is ruined in the way that I said. But as soon as he goes to confession he can suddenly stop masturbating; he gets the identity back.

About the justice question, I think it is simply to justify the doctrine of hell, which does not fit well at all with the idea of justice as instrumental (because many people do not believe in hell anyway and because if it is a question of deterrence, surely a billion years of torture would be enough).