They have lots of properties from general NPC, such as: they have limited number of fetishes when generated (aout 2-3 usually) and several like/dislike desires. AFAIK there is no difference between children from breeder game and others. And ofc you can impregnate them. More than that, you can even make them your slaves.
While I can't confirm it but I think your fetishes and desires are taking into account when you impregnate someone (but it doesn't mean they always match, they can hate something you love and have fetish for). Your children definitely inherit some of your appearance, race etc.