It is very easy for such rumors to get overblown, IMO. There may be some elements of truth there, such as the emotional intensity of the matches vs. Western opponents, and the fact that winners will be rewarded materially in some fashion. But the "Off to the Gulag you go, Loser" image that is so easy to have is probably not based in any sort of reality.
Maybe, maybe I could see some sort of "punishment" for a coach who through gross negligence causes NK to be embarrassed. But wholesale punishments seem pretty unlikely. It'd be hard to retain any sort of continuity of experience and/or skill, because there's no such thing as the 100% athlete who wins all the time, and if you are carted off after a loss, there'd be no athletic program any more.
I'd also strongly suspect the NK athletes are under extreme "gag" orders not to discuss what they saw and experienced outside the athletics themselves. The team handlers are probably also spies who make sure the athletes behave themselves.
Kind of reminds me of the decades past where a Cuban or Soviet athletic defection was an almost weekly occurrence, with the exception being the NK athletes have even less of a chance of succeeding... or don't even want to try, so complete is the brainwashing.