Ok, I fear i'm in a minority, and I hope this doesn't make me unpopular, but EUOL, I couldn't get into it until you got to the end and it was less "whacky."
I guess my problem is really that I know how witty you can be, and this book was more often than not just silly without being witty (i'm not coming down against silliness -- I do after all hang around lemurs and ninja monkeys, but the silliness in a 50000+ word work has to be much more witty than a single comic strip or a one paragraph post).
As for the scene not being in the book: I was actually happy it wasn't to be. That opening scene was a major hinderance to getting into the story. It was far to ridiculous for me to accept. Introduced much later, I probably could have swallowed it, having been gently introduced to evil librarians, but stand alone, it reminded me of something a dark-souled Wiggles show would present.
I'm not sure how I feel about the naming scheme. There never turned out to be a great reason for it, but at least you used it. It would have been very annoying as a single running joke, but since ALL the smedley's were prisons, the consistency helped it out a lot. I was much less bothered by it at the end than I was at the first hearin gof it. Incidentally, this is almost the same reason why I didn't grab up that "Levin Thumps" book was because of the silliness of the title. i couldn't discern any wit in it, espcially since most of the humor in the word "foo" (also used in the title of that book) is how it is used so often in programming and the book didn't appear to be informed by that familiarity. I bring this up because the title of "Alcatraz" bothered me in the same way. It's funny after you read a while in the book, but it doesn't carry any wit as a title to someone who hasn't read it. My opinion, for what it's worth. Like i said, I think my major complaint is largely disagreed with by the other posters here.
As for first person, I'll precede my opinion by pointing out that i have neither read Lemony Snicket nor seen the first person conversion.
* I don't like the interjections by The Author. only one really got a humorous response.
* However, they DID make me think quite a bit about how Cervantes presented Don Quijote, so I assume that it could be worked better. but I don't know many people in the younger audience this manuscripts targets that are remotely familiar enough with the narrative conventions of Don Quijote to resonate with it. Thus, I think it better if they were cut, rather than reworked.
* When you suggested turning it to third person, I cheered, primarily because that would remove the parts that irritated me most.
* Simply changing it to first-person and leaving the structure otherwise as is would probably come across as very weak. Yes, it WOULD be a very different book than it is now. Which is why if you go that route, it would REQUIRE a major re-write, not just a conversion. You'd lose your author's identity joke, but I wasn't too impressed with that anyway.
* I think a complete re-write, using the best lines but changing the whole structure so the story was told in first-person from Alcatraz's view would be very good.