What an unusual and smart idea. The biggest hurdle I can see is fundamental literacy. I have taught in jail before, and some felons have such challenges with simple reading and writing that they will need to do a lot of work before a book by John Steinbeck or Toni Morrison makes sense to them. For those who read well, though (and I encountered some highly literate people in jail, too), this is a creative and constructive idea.
There are also two fair arguments that (a) it's not right for prisoners to get personal tutoring from college professors and access to their otherwise expensive classes when many of their victims cannot afford such luxuries; and (b) books shouldn't be transformed into punishment. I'll grant both arguments have merit. But I still like to see people thinking laterally about alternatives to incarceration, especially for nonviolent offenders.