A month ago in this space, I recorded the dismay spreading through the UK Prison Service as a result of Jack Straw's banning of a well-established comedy course at Whitemoor Prison. Some nasty little toerag outed it to indignant tabloids looking for something to get cross about.

The result, you may recall, was the Justice Secretary's ruling that comedy in prison is “totally unacceptable”, “not a constructive pursuit”, and that all inmate activities - even if not funded by taxpayers - “must be justified to the community”. Comedy sounded too much like fun, even though heaven knows the science of laughter is devoted to laying bare just the kind of stupid failures of judgment that tend to get you into prison in the first place.

A PSI - Prison Service instruction - followed this, laying down formally that all activities must now be judged not only by whether they do any good but by how they “might be perceived by the public”. Sir David Ramsbotham, the former Chief Inspector of Prisons and patron of several prison arts projects, robustly described the PSI as “lunacy”. Organisations that take arts into prison were more cautious, not wanting a fight; but they were scared, disheartened and in some cases had projects abruptly cancelled by understandably nervous governors. Nobody, after all, has defined the parameters of a “public acceptability test”, and where convicts (or even remand prisoners) are concerned some media can work themselves up into a rage over anything better than bread-and-skilly and the lash.

Even obviously humane projects bringing together prisoners and families found themselves threatened. It has been a difficult time. It still is. And it shouldn't be. Prisons should be free to do whatever contributes to rehabilitation, purpose and human connection. The “public acceptability test” still needs harpooning. So it seems only fair to tell you about one that got away: given a last-minute reprieve after agonising doubt, Pimlico Opera and Wandsworth jail are currently presenting West Side Story. I went to the first night on Friday; it is booked out for the week by supporters, fellow inmates and performers' families who may all now see, enjoy and digest its messages.

Not just the obvious messages about the futility of gang warfare - though God knows, when the three young men lie dead by knife and gun on the bleak gymnasium floor, it is impossible not to remember that last year alone 27 real teenagers were killed across London, many not far from these iron gates. Bernstein and Sondheim's Romeo and Juliet story from 1950s Manhattan offers lines that speak painfully well to the swaggering gangs and racial tensions of London 2009. “You kids make this world lousy!” says Doc (played by an inmate). “Fighting over a little piece of street is so important?”

The other message, though, is less dependent on the plot, for Pimlico Opera often directs prisoners through rather less morally uplifting pieces (Chicago, Guys and Dolls) with equally good effect. That second message is about work: co-operation, learning, taking direction and how it takes the sweated patience of theatre to create, in a live moment, a magical emotional unity between audience and performers.

I am not sentimental about prisoners: many of them deserve (and need for our sakes) to be inside. But jails are full of emotionally disconnected people, angry and unhappy but without words to defuse it, and often without any vision of the beauties that transform sorrow. A reason for supporting creativity in prison - visual arts, comedy, drama, writing, music - is because the arts offer routes for that expression and vision. Especially if the standard demanded is high and the work hard, as here. It is not light work for prison staff, either: it creates extra duties and cares, which is why it was so grim when the PSI added to that anxiety.

But it is worth it. Hearts inside and outside Wandsworth walls are being deeply touched this week: connections made, hopes raised. And that is thanks to Pimlico Opera, its remarkable cadre of donors (no public money here) and the Wandsworth governor Ian Mulholland and his staff. Officer Krupke, I may tell you, is played by Al Stewart, a prison officer of 20 years' standing, whose sporting willingness to be chased off the stage without his hat by a team of Jet roughnecks can only improve morale all round.

The rest of the cast - except for the orchestra, the women and the leading man Tony played by the professional Andrew Bain - are inmates. Eighteen of them, a few with minor theatre experience but most with none. The men offer brief statements in the programme. “This is a chance to get out of my cell and do something... We, the prisoners, feel our dignity has been handed back to us... This play confirms to me that life is full of ironies... Bad guys can become good guys... I am a foreigner banged up in a foreign country, thank you... In drama there is life... At 40 I lost track of my life and have been a bit crazy, to take my mind away from the monotony of C Wing it is a real shining light... I have been a little shit all my life and am gradually sorting myself out.”

Well, some of them may do just that, and West Side Story will have helped. It does something, too, for us free citizens who are escorted through the many locked gates on such an evening, looking fearfully up at a sliver of moon over the high walls and razor wire. Wasfi Kani, founder of Pimlico Opera, says firmly that outsiders need to be more familiar with prisons, because we (not just the Home Office) own them. We fund them, we vote for those whose policies can dictate whether they are good, rehabilitative places or mere human dustbins to breed more rage and misery.

There is one extraordinary moment in the Wandsworth production. You almost certainly know the shape of this 50-year-old musical: after the first two deaths, the young lovers meet again and have a big yearning number, There's a place for us. But the director Michael Moody offers something different. Just as the familiar music began, the lights on the pair dimmed and the two professionals quietly vanished. Instead, from the high gallery over the gymnasium, the two rival gangs played by inmates sing, gently, in unison. “Somewhere a place for us/ Peace and quiet and open air... We'll find a new way of living, we'll find a way of forgiving. Somewhere...”

You could feel your breath stop.

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