You could just not give the government the revenue. If you get a traffic ticket the fine is paid to your choice of any 501(c)(3) nonprofit organization.
In theory you could still have police issuing tickets because they want to increase donations to the Red Cross or something, but the cops have no control over which organization gets the money, and they certainly don't get to ride around in toys the money bought.
The trick is that choice must somehow be removed from the equation. I'm starting to like the federal reserve concept more since they initiate the circulation of money in the first place, they would be the most neutral party and it would be economically neutral at the national level (though it would suck money out of local economies... hmmm...).
I don't really see how people choosing to donate the money to particular organizations should be any more controversial than allowing the organizations to be tax exempt in the first place.
And using the money for a governmental purpose generally is a bad idea because it causes the people responsible for making and enforcing the laws to be the ones who benefit from issuing unjustified penalties. Giving it to the federal reserve is no different; it will cause them to soak up more government paper which allows Congress to spend more money which Congress likes and thereby provides them with the perverse incentive to pass bad laws.
An interesting alternative would be to dedicate the money to something that would otherwise be chronically under-funded, like the public defender's office. Which you could then sell as criminals funding the cost of their own defense.