I'm going to leave aside demonic pairings as human/anthro pairings are probably far more common. This is how the game determines offspring traits based on what I'm gleaning from the current source code. Feel free to correct me if I've made any mistakes. This is going to be a loooooong post, so apologies in advance for that.
When offspring are generated, their starting gender is determined using the distribution that the player can configure in the preferences screen (and it appears that this can be weighted in the race definition as well). After that is done, the body is generated.
The game first checks to see if the father and mother are humans. If one partner is anthro and the other is human, the anthro's body type is chosen. If both are anthros, the odds are 50/50 between the father and mother. If both are humans, the father's body type will always be selected (this may sound like a moot point, but it does matter later…and I believe it's most likely a bug. Spoiler tagged at the bottom of this post for those interested).
Next, the race stage is impacted. This essentially determines how "pure" the anthro race is. There are five stages available: human, partial, minor (a.k.a. PARTIAL_FULL), lesser, and greater. This trait impacts how furry the anthro is, with greater being dangerously furry and partial essentially being kemonomimi, with the other stages being something between the two. There is a 1/3 chance that the stage will be preserved, a 1/3 chance that it will be reduced once, and a 1/3 chance that it will be reduced by two stages. If the race stage is "minor," there is a 2/3 chance that it will be dropped to "partial."
The bodily traits are taken from the parent that is closest to the child's target femininity value (yes, if the father is more feminine than the mother, highly feminine offspring will be more likely to take after the father). I'm going to refer to this parent as the "dominant genetic partner." Immediately after this check, the partner that the child takes after immediately inherits the taur trait if it's available for that body type. The colors of the offspring's anus, nipples, mouth, and tongue are also inherited from the dominant genetic partner.
Some of the child's traits from this point out have a 75% chance of being more heavily influenced by the dominant genetic partner (which I'll call the "75/25 rule"). The game doesn't attempt to simulate recessive traits, so the iris, pupil, and sclera pattern, color, and glow flag will always match that of either the father or the mother.
A few of these traits, mostly dealing with lengths and girths, do have some wiggle room. Body size and muscle mass set a minimum and maximum values to that of the mother and father, ±5. For example, if the mother's muscle value is 70 and the father's is 55, the child's muscle is capped to anything between 50-75. Using the 75/25 rule to determine the inherited gene, the value of the base species matching the child's femininity is retrieved and that value ±30 is used as a basis for a random number. If the child is feminine and the feminine muscle size is set to 50, the result can be a value between 20-80. The value is then capped to the parental minimum and maximum, so if the RNG rolled 80, in our above example it would be clamped to 75.
The other size-based traits work a bit differently, and it's worth noting that the 75/25 rule is
not used for any of these checks. Those take the base value assigned to the child's body type (as inherited from the dominant genetic partner five paragraphs above) and apply a variance to that value based on the dominant genetic partner's equipment using the following formula:
base = round(base + (parentSize - base) * 0.1)
If the value of the DGP's part is 0 (such as when penis size is inherited from a parent who doesn't have a penis) the base value is used as-is without modification. If, for whatever reason, the child is set to inherit traits from both parents (as far as I can tell this is impossible) the parentSize will be the value from both parents and averaged.
The remainder of the traits—breast count, rows, oral modifiers, and all that fun stuff—work a bit different. Each of them has a certain percentage chance that they will be inherited directly from the race's default values. If this check fails, the value is inherited directly from one of the parents using the 75/25 rule. This allows, say, two foxes with tentacle penises to have a child with a normal fox cock. It's also worth noting that each of the modifiers will be considered individually, so it's possible that the aforementioned foxes have both tentacled and flared members, it's possible that the child may only inherit flared. Additionally, this system will never remove traits, so even if both of the vulpine lovers removed their knotted trait, the child will always have it.
Finally, it doesn't appear as though cum, girlcum, and milk properties (flavor, hallucinogenic, etc) are passed onto the child.
tl;dr there probably isn't as much variety with the genetics system as you probably hoped for, but the more different the mother and father are the more interesting the results can be.
