It's a neat idea. You're likely to get PCs of a somewhat sociopathic and anti-authoritarian nature, though, so be prepared to deal with rape, pillage, and murder. That's really not my style but some players (and GMs) might enjoy that kind of thing.
I currently play a Latvian PC who joined the U.S. 8th ID as a scout-translator after "defecting" (i.e. deserting) from a Soviet penal battalion. He's actually not a bad guy, though- he's kind of a thug with a heart of gold.
I got the idea after reading about Soviet penal battalions in WWII and, as you mentioned, the Germans had similar units called, IIRC, punishment battalions. They were often assigned missions like clearing minefields ahead of the assault units. This was done by marching across the minefield under fire- a suicide mission if there ever was one.
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