Room 23

The brainwashing room was incredibly interesting to me, and it brought lots of thoughts to mind. Notice the re-occuring theme on this show of "good people" vs. "bad people." I think that Jacob's list is what divides people into one or the other of these camps. If you're one of the others, and you're not on the list, not one of the good ones, or perhaps it's undetermined, then you get sent to the brainwashing room to get converted. If it worked for Ted Haggard, it can work for Karl.

My shangri-la theory is that they're trying to create/maintain a utopian society. No room for "the bad ones," which is why they feel perfectly justified in killing those that they deem bad.
If you don't want to kill them, you brainwash them. Or perhaps more importantly, you get them when they are children, before they can be spoiled by the ills of society, and use dharma-sponsored psychological conditioning.

Also note the continued use of Buddhist images and eastern philosophical text. Again, this connects to the eastern philosophies that Shangri-La is founded upon.