As for the first part. Since the images AI generates aren’t photographs but somewhat artistic renditions, they can essentialy be classified as art. And art containing nudity of minors is already regulated in many countries and a legal gray area in others.

For the second part. In my and the majorities opinion, no you can’t have “imitation” children for pedophiles, for the same reason why you can’t have “imitation” bodies for serial killers or “imitation” buildings for arsonists. It is not our social duty to provide an outlet to people that can’t function in society. Giving leeway to evil, gives it a chance to bundle up and organize, making it harder to fight against - see for example drug cartels or sexual misconduct of the church. Giving an outlet is one step closer to normalization of any crime.

I also know that we tend to close our eyes on some peoples pedophilic tendencies like Elvis Presley or Charlie Chaplin because of their “social value”. Which is probably why this question comes up far more often than something along the lines of should it be okay to murder people?. A good quote comes from the comedian Jim Jefferies: “How talented do you have to be to fuck a kid?”. Most famous pedophiles are innl part a product of their enviroment. The entertainment industry, is basically crimes on top of crimes. Drugs, union busting, fraud, money laundering, verbal, sexual and physical abuse and pedophilia. To bring this back to your question let me paraphrase it. Should we give leeway to pedophiles? I say no, I would gladly sacrifice a couple of songs from my playlist or a few DVDs if it meant that the crimes of those people would be undone.