As for release letters, they don't apply.
Why?

Because the employer has employed an FT illegally. If he issues a release letter, the letter will prove the illegal employment. It'll be interesting to see what transpires in Yuncheng, if anything.
I'm not teaching now, so it won't affect me. I forgot to mention that some FTs in Yuncheng have Shanghai residence permits, which is also illegal.
I'm not going to answer your other questions on this public board, but I agree with you that it's risky to teach illegally. Unlike you, I can sleep well while doing so. We are all different. But then again, I have the money to pay for new passports and to pay fines. As for HK, it's a concrete jungle that I have no interest whatsoever in visiting. As I said, we are all different. Good luck in your job search.

I do not envy you living in the UK. Free speech there is being severely compromised. The link is below. You can listen to it.

http://www.abc.net.au/radionational/programs/counterpoint/