Be too fussy in jail — it's punishment, principally (7)
I believe the answer is:
nitpick
'be too fussy' is the definition.
'in jail it's punishment principally' is the wordplay.
'in' indicates putting letters inside.
'jail' becomes 'nick' (I've seen this before).
'principally' suggests taking the first letters.
The initial letter of 'punishment' is 'p'.
'it'+'p'='itp'
'nick' enclosing 'itp' is 'NITPICK'.
(Other definitions for nitpick that I've seen before include "Find little fault" , "Raise petty objections" , "Be very particular" , "Choose carefully" , "Carp" .)