I am puzzled about the reason why "confine" means "restrict; place limits on".
My doubts are:(1)"con-" prefix has a uasge of "intensify their meaning" (refer in here); (2) "fine" means "good". Why the combination of them leads to "not good" instead of "goooood" in order to intensify the meaning?
The etymology of a word does not strictly dictate its meaning, but in this case, it would have been useful to look up the etymology of confine itself. The word is not formed in English, but rather, as Oxford Living Dictionaries has it, confine derives
from French confins (plural noun), from Latin confinia, from confinis ‘bordering’, from con- ‘together’ + finis ‘end, limit’ (plural fines ‘territory’). The verb senses are from French confiner, based on Latin confinis.
The Latin word, in other words, is akin to with a boundary, not intensely good as you propose. The verb meaning naturally follows to circumscribe, and metaphorically to set a bounding limit.
In this case, the prefix con- refers to its other meaning, "with." Furthermore, the second syllable of the word, "fine," does not refer to the English word "fine," but instead, the Latin word finis, meaning "end" or "boundary." Combining the two, you have a literal translation of "with boundaries." This definition is in line with that which you provided for the verb form of "confine," and also the definition, "something that encloses," of the noun form.
If you dig around in the dictionary a bit, you'll find that there's a prefix com- that means "with" or "together", as seen in words like "companion" or "comrade". Furthermore, before certain consonants, that prefix modifies to con-. Other words using this "con-" prefix to mean "together" include "contiguous" and "connection".
Although the two words do trace their roots back to the same vocable of Latin origin, in Modern English, fine in the verb confine has literally nothing to do with the adjective fine which means good or of very high quality. And of course that explains why they mean different things. In other words, fine in confine is not the fine you're thinking of. confine originally entered English through French in the form of the verb confiner which meant to have a common boundary or to share a limit (con means together and finer means to limit). fine, on the other hand, came from a separate word. Here's what Wiktionary has to say about its etymology:
From Middle English fin, fyn, from Old French fin (“fine, minute, exact”), probably from Latin finitus (“literally finished (used as an adjective by Cicero, of words, well rounded)”), past participle of fīnīre (“to limit, bound, define, terminate, finish”), from finis (“a limit, end”).
