I like the idea, but I am not seeing where the problem is.

Go for the 10 refresh - or better yet 8 if you don't want anyone to be a full on wizard.  Probably for the best, will also help them all differentiate.  Make them channelers, or evokers only, or ritualists or minor talents.

They will take Lawbreakers.  And they will slowly descend into insanity.  And eventually one or more will break and become NPCs.  This sounds like a dark story you are telling and that sounds intentional, why does it by necessity have a happy ending?  Why not ask what is worth selling your character's soul for?  This game is all about the characters being twisted, so let them be twisted.

Keep in mind, you are not going to be getting like 10 lawbreaker stunts all at once.  Just make sure to advise people not to fill up their refresh costs, then let them get down 2-3 points of refresh.  If you want it to last a bit longer, make sure there are major milestones to add refresh.  That will add the feel that they are constantly riding the edge.

*EDIT* Just to clarify, I feel like dropping to max -2 refresh and combining to one Lawbreaker stunt will lower the flavor, lower the impact and really marginalize it to just a general - I am a bad guy and good at doing bad things.

As opposed to the more flexible, I am a mindbender, and your minds are as toys before me - vs another character that might be killing people and start thinking of themselves as a tool or weapon, or start to enjoy it.  Or a fleshcrafter that begins to find the art in it.

There is just so much more impact and more potential for good story if you don't try and lessen/remove the consequences.  Make it a dangerous game.

That is exactly what I meant.  Also
Would that be something more like one of them using Summer/Winter magic to lay down a gobsmack of a Gaes using thaumaturgy, perhaps at evocation speed?  Would it just be a social attack with so much tagged and invoked aspects it was irresistable?  How would you lay that out.  I love the idea of debt for power and it works great, even for Summer/Winter magic but if the Fae Ladies can already force the Knights to do what they want then it sort of drops some of the impact of debt.  That said, being compelled in individual cases with no fate gain could be a bad enough consequence as it is.

One of the advantages of Sponsored Magic is the ability to take on debts that bring on compels in order to do things like invoke aspects or deal with stress and so forth.  The downsides of doing so are pretty apparent for things like Hellfire and the like.  However, when it comes to being a Knight of the Courts, what is the difference?  Can't they compel you to do whatever they like, whenever they like anyways? 

Obviously not something you want to overdo, both for fiction reasons and for ensuring players have a good experience.  It just seems like a
big part of being the Summer or Winter Knight is that the Ladies of the Courts can force you to do their will already.  What is the point of debt for them?  It doesn't give them any additional control over the Knights that they don't already have.