Not really. There are numerous other ways to remain free. Not getting caught, breaking out of prison, or having someone else break you out. Just to name a few. Also all things confirmed viable (and used by the criminal population) in canon.
Except they do? We see the villains cooperate several times in canon. If the Protectorate/PRT/Cops started bringing lethal force to bare, they wouldn't just take it.
Your "Hidden" villains do exist in canon. As you noted, Coil is one. Lisa wanted to be one as well, but Grue wouldn't let her. Taylor actually tried this, iirc, on her first night out. Unfortunately, Lung spotted her (she moved, disturbed some gravel or something). That and Taylor's issues (at the time) would've eventually forced her out anyways, even if she hadn't joined the Undersiders (which put her in the same situation as Lisa). Dinah definitely would've been another, and essentially was, albeit unwillingly. Even after she was freed, she never really went out, and I don't think she ever "officially" donned a cape name (although she likely had one).
However, keep in mind shards are pushing people towards violence, and the Entities have a lot of experience tuning the restrictions/changes to get the results they want, and wearing a mask creates a clear distinction between cape life and normal life, likely something propagated by Cauldron in the early days.