Penals perform ok and the armour is what makes them a good unit to merge with to save some manpower and keep a damage dealing unit on the field, it also gives merge actually a good use.
The only thing worth thinking about would be a cost decrease to 300 or 320 manpower (and maybe 7 or 8 instead of 9 population cost).
Penals have a role and are good at it, however in most scenarios they are too costly for it. Their manpower and population cost put them in the same league as elite infantry which they're not quite.
When one squad needs to constantly rely on other squad to make it work, then it means it doesn't work.
ESPECIALLY if we're talking frontline infantry and not weapon teams.
Current penals role is quick feeding exp to LMG/G43 grens and panzergrens.
They are good vs AGs only because AGs are cheaper, weaker and have no upgrades.
Agreed on cost and pop, AGs could also use 40mp drop.