Have the Mugiwara pirates ever cashed in a Pirate for a bounty reward?
Yes, Zorro received money and lived this way though this was not his intention or occupation, he simply wanted to fight strong guys.

The bounties are based on the level of threat that person is for the world government.  

Also if you have a bounty on your head and you kill or defeat another wanted pirate probably wouldn't be a good idea to take it to the marine force and ask for the prize cause you're actually turning yourself in.