doesnt really make sense

At the time of her arrest they were not certain she was a Flying Dagger. With one exception the police force did not even know she knew Kung Fu until the first fight, they only knew she -might- have some connection to the daggers.

So she was originally arrested for the Tang equivalent of assault on a police officer and then resisting arrest. Only after they found the trademark daggers in her room did they dream up the idea to let her escape so she would lead Jin to the Flying Daggers headquarters, where he would either assassinate the new leader or go home for backup if he thougt the leader was more than he could handle on his own.

dear g-n
these kind of films are not designed to have perfect sensible plots with logical endings
in other words these are art films that have stronger elements relying mainly on cinematography art direction..colours..acting..music choise..
there fore he made it clear that he is presting elemtns that do not appeal to laws of the mind, like fighting anti gravity fights
this film simply shows off fighting skills with swords techniques and daggers and along with is an amazing art direction and photography.
if you want another tighter plot..u can switch ur tv channel to a bond movie or so..:)

What doesn't make sense more is why Jin never had an inkling Mei wasn't blind before the revelation???

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You caused the rain to blood.

Jin suggested there was a HOFD spy at the pavilion and he arrested her and he manouvered the conversation so that everyone would follow Mei back to the secret hideout - and all the time he was working as a double-agent. So it all makes sense in a convoluted way.