Penals have a high DPS and the best offensive veterancy-bonuses of any infantry in the game - and they can deal with garrisoned units. Add to that the ability to merge and we have an infantry semi-glasscanon, where unit preservation is thoroughly rewarded.
Conscripts also can't complain on their offensive veterancy and its not like they can't deal with garrisons. Add to that no need for being constantly merged and a ppsh doctrinal upgrade and we have an semi assault infantry, where unit perservation is always rewarded because they are relatively easy and cheap to maintain.
I don't think the problem is the Penals, I think the problem is a combination of the player's not-yet-matured understanding of how to utilize this unit, and T1's role in general.
Problem is exactly with penals.
They are not good enough at range, they don't bring any utility that conscripts already have/can have upgraded, they are really onbly effective on mid/close range, but then again, ppsh cons are too, for much less, while not feeding huge vet to opponents.
Penals have no role that other units wouldn't do better, cheaper and more effectively.