re: Not having kids, the ancients at their peak were masters at building both mechanical and organic lifeforms, so at some point they probably created some sort of sci-fi Ultimate Birth Control that everyone was on. They mention that they have parental obligations towards the iterators, and Moon even calls them her parents, so I suppose they channeled their instincts to raise children into the iterators/other lifeforms they created. (I think you touched on this with UI?) Why make kids when you have "kids"?
Ohh godd I don't know! That's a cool idea!! Still sounds unethical, there's no way every single ancient was fine with that!! I think!! How do you enforce that!! Does it just?? Oh man!!!!
As for iterators being their kids? Well yes, but I wouldn't say they are a replacement. Iterators have been around for MANY MAAANY generations. Aka when ancients could still have kids, iterators aren't a replacement to that. And it is very different to have a child in your household and to have an iterator who honestly takes care of you more than the opposite. I imagine they could interact with their iterators kind of like you can just call up Alexa, but that's not as personal as adopting or having a kid you raise into an adult, I'd say? I doubt it could satisfy everyone that's for sure.
The joke I drew with UI was that ancients missed having kids around so much they designed an iterator after one. Not like they stayed around for her at all.
Jokes aside UI IS really designed with the concept of a child in mind. The thought process was that perhaps the solution required a special kind of approach. So they made her super small and child shaped and named her Unparalleled Innocence as that's what you connect with kids. Their lack of experience and naivety has them approach things in a specific/unique way. And the last iterator ever made will inevitably be the one lacking the most context about the world.
Perhaps the solution required some out of the box thinking other iterators couldn't reach anymore. Either way UI didn't find the solution anyway so what can you do.