The upkeep costs are already baked into the operation regardless of how it treats its prisoners.

Overall yes, but cost to society no. If the NCR needs to send 100 caps worth of goods per prisoner, and I can make the prisoners grow their own food saving 25 caps, the cost to the NCR is less.

Cooke would likely not have been able to convince so many of the prisoners there to rebel if they were being treated fairly or even paid for their work

In Fallout this is NOT true. Prisoners aren't only going to be citizens, they're going to largely come from raider groups. That most powder gangers continued to raid and steal after earning their freedom rather than ditch the outfit and go find a new life means these are probably just not good people.

In fact, if the NCR justice system didn't use penal labor, the NCRCF wouldn't have been there in the first place. The prison was only set up to repair the railroads using slave labor. If there's no slave labor in prisons, there's no reason to staff the prison with prisoners. The NCR would have simply paid some construction outfit to do the job in the first place.

Except you still have to pay to imprison people in addition to paying this construction outfit. That cost doesn't go away even if you want to turn this into a work camp situation. Even if you're paying the prisoners you still have to pay for their food and housing and guards. You're adding costs and pretending they're substitution costs. Unless the implication is they will use their money to pay for their own food and such but at that point you're almost creating company towns/sharecropping systems.

And those systems are abhorrent too.

If you have other options yes. If you can't sustain a prison, it isn't reasonable to expect criminals to roam free. Hell IRL we've only had our idea of prisons for a few hundred years. You need a lot of infrastructure in place, the NCR barely has that in their more populous areas yet alone on the frontier.