that it did in fact exist except that they never needed to use it.
They did use it, though. After his attempted takeover of Equestria Tirek was thrown into the dungeon that you mentioned. He was locked up for a very long time until he was freed in S9 (I think). So it wasn’t like it wasn’t used, Pinto. It was just used for prisoners that the Princesses deemed to be ‘irredeemable’ (when they couldn’t just turn such criminals to stone).
And honestly, I don’t think human-world lockup is ‘distasteful’ in any way-rather it makes sense considering what had been going on before the events of ‘a New Generation’. I can imagine that, with the various pony species not trusting each other, and the magic to turn prisoners to stone no longer being available, a policing system and an incarceration system would have been needed. Truth be told, Hitch likely knows about this incarceration system, and it’s a big reason why he has a jail cell in his own office. I don’t know if it would have been used as much as the real-world prisons, but it would have been used for various ponies that broke local laws, just as real-life prisons are used for.