Isn’t it a good thing for pedophiles to have an outlet for their desires that doesn’t involve harming children? Am I not seeing an obvious downside?

Pedophilia is not a sexuality and CSAM, AI generated or not, is not a healthy outlet. Pedophilia should be treated as a disease, and pedophiles should receive treatment for that instead.

AFAIK you can’t “cute” pedophilia the same way you can’t cure homosexuality. The best you can do is teach people not to act on their desires.