Forgetting the obvious 8th amendment "Cruel and Unusual Punishment," issues. Allow me to tell you what I'd do to you if I were a penal soldier. These are just examples:
The "Violent Model:"I'd act like the perfect model soldier right up until I had earned your trust a few times. It might take me a year or three but I will maim you in horrid ways. No no, you don't get off that easy with the whole "me killing you" thing, you live with half your face and most of your skin gone.... Light match and maim. Simple. I don't know and I don't care how much gasoline that would require, but let's find out shall we? And that's just the "blue collar" version of screwing you over. I'll steal your freaking identity. That doesn't even get into the sexual criminal's version of things. (that's right, this IS the nice version).
Failing that you gave me a gun (and explosives
!! ), when the fighting starts, I switch sides and kill a good chunk of the "regular guys" you sent to control me. Sure, I'll die but I'm taking you with me. Ah, bullets, the great equalizer. Then there are other "equalizers" like poisoning your food/water supply, disrupting your communications, giving the enemy supplies, leaking secrets/intel/troop movements to the enemy. Basically I could arrange an ambush and slaughter an entire battalion of your soldiers.
I know I'm gonna get shot and die, but I have a good shot at screwing you up and I'm gonna take it. The logic of "do this or we'll shoot you," doesn't work if I'm ok with getting shot and dying. Prison guards get attacked all the time and the prisoners know there's severe punishment for that. It doesn't stop them. If I'm a penal soldier you've made me cannon fodder anyhow so I'm probably going to die. You're the reason I'm in that position and you or whoever the crap is around me will pay for it dearly.
The non violent model:Then of course, forget everything I just said, I'll just refuse to fight.
"Go ahead, shoot me." You can't do it, I've been sentenced to a term of years for a crime but not capital punishment. You don't have the legal authority to shoot me and if you do then you're guilty of murder and you can take my place. I'll even wrap my lips right around that barrel.
You are essentially giving your enemies reinforcements inside your own lines. Also, you cannot defend freedom with slavery.