I do not think players would prefer deathmatching for money while punishment is the price. Deathmatchers deathmatch anyway; they don't stick around. It's the players that stick around that follow the rules; they know better than to deathmatch for money.
As for "if a player drops 25% of the money, where does the rest go?"; currently when you get killed, you loose 100% of the money. What's better then? Losing it all into a place of no return, or losing it into the server (being able to get it back, at least a part of it)?
Hitmen wouldn't have to worry about not getting paid; complete the hit, take their money, kill the person that refuses to pay for the hit they placed, take their money. (Don't quite remember if the pay was automatic, but nevermind that.)
Extra for the cops as the result of hard work and risking their lives; kill criminals, take their money. (?)
There are countless benefits, really. But the part I really like is the fact the money wouldn't just disappear into nowhere!