Hey!
To reiterate what's been explained...
Garrisons take prisoners and put them in the dungeons, and lords will also "donate" prisoners to dungeons - but it isn't *just* lords but regular troops as well. There is no reason to put regular troops in dungeons, and even if there were (garrison potentially converting prisoners to troops) it does not make sense to prevent nobles from being put in dungeons in favor of regular troops.
Despite dungeon size, after sieges, there are TONS of prisoners, and they are all put in a dungeon, often to triple the capacity of the dungeon, preventing any nobles being placed in there.
When you join a faction you can manage your own dungeon, but as a mercenary you can be left with nowhere to put nobles leading to capturing them over and over an over again.
While it may be "intended" (though I dunno, just going off the comments in the thread) it certainly *looks* like a bug and is a poor experience and adds nothing to the game. It's not fun, nor is it realistic, nor is it a real challenge, just annoying (although I would argue anything that adds a challenge that is neither fun nor realistic shouldn't exist).
Thanks!