My overall arguments were that whilst I respect all of your noble intentions, in bringing T1 into better use whilst simultaneously providing an alternative to guards by using penals...
It is unfortunately at complete odds with the inherent design and theme of penal battalions. They were suicide squad of alleged cowards and criminals condemned to die in combat, not elite multi weapon specialists, and it just doesn't work from a design perspective. Whilst I usually think competition rts > realism, this is a bit too much.
Two solutions I think would be good:
1) Revert to old pre buff penals, just make them a lot cheaper, and make T1 cheaper (a bit).
2) Experiment with penals as a 'not one step back' suicide squad, that can't retreat but can 'hit the dirt' until death. Just my idea as a role for them that would suit design. They would be great at keeping points from being captured or allowing you an anchor point to fight around.
I think with the nerf to guards and a buff in cost to T1/ penals you could break the meta whilst not being too elaborate and breaking the design.
I don't think any of these will work, the first solution is bad becouse it still means that T1 has no AT and no late game perspective at the same time. At least one of these is needed for T1 to be used without making penals so OP they can close game in early game.
As for the second one it is against squad preservation... They would at least need some Allied Industry like ability not to degrate your army with every push. Still it would be just a gimmick that is used only by really hard non-meta belivers.