I would think the problem with the camp X-Ray approach is the same as happened historically in Botany Bay or fictionally in the Moon is a Harsh Mistress.
When (not if) the ongoing support of the penal colony collapses what
happens?
The children are in legal limbo; neither convict nor citizen. (No one is going to pay the expense to ship them home). The colonists are cut off from the home world/empire. They had little love for the home world/empire in the first place. Cut adrift and left to their own devices why wouldn't the colonists/prisoners declare independence and have an interplanetary war of secession?
Nothing like that happened in Botany Bay. Not even in Mel Gibson movies. The transported prisoners were (almost all) transported for a term of years, often 7, and when it was over they were given return passage, or allowed to stay on in Australia. Most stayed - the worst thing about transportation was the passage, which killed more than the sentence did.
Any children they had were as much citizens (or rather free subjects of the crown) as anybody else.
While in Australia prisoners were mostly hired out to colonists (AKA "squatters"). There were strict rules about their treatment that were sometimes even enforced. The minimum standard for food and clothing in the rules were not only (much) better than prisoners would have had in England or Ireland, but in fact better than many poor labourers could have found for themselves back home. They often prospered and their children and grandchildren prospered mightily. Between about 1870 and the Great War Australia was probably the most prosperous country in the world, and working men's wages higher than anywhere else, including the USA.
Historically the transported prisoners and their immediate descendants were mostly supporters of Britain & the Empire. And of course there never was a war of secession. In fact the Australians recently voted to keep the monarchy - though mainly due to lack of a convincing plan for what to replace it with.
