Well, based on your setup, it seems cruelty is going to be relative. Like what's been mentioned, it comes down to what you're asking your players to suspend their disbelief for. Having a different history than the world we live in certainly can provide context for branching authoritative strategies schools and headmasters employ.
From the sound of your game, the schools are much more about behavioral re-education. If it's normal for society to punish people through sexual humiliation and obedience training, my personal hangup with this type of game, I'd need to know why it works over other tactics. What does the ideal student look like? Are the tactics a last resort, or a first? How does this place get away with it without drawing the attention of other nations? How does punishment escalate? When spanking isn't enough, do you put them in restraints with a ball gag, or solitary confinement strapped to a vibe machine for days? Will you dive into the potentially severe mental trauma caused by mixing pain and pleasure and calling it punishment (feeling "good" can be learned to be feared which can be all kinds of messed up imo)?
Of course, you don't necessarily have to bog down your game with exposition, but you can certainly sprinkle it through dialogue or game progression. Depending on how much depth you want, you'll want to answer at least a few of these, and more as you go along. However the fact that I can come up with questions like this means you have a solid idea to start, and that's a good place to be. I hope this helps, good luck on building your game!
