If that's the 'most fucked up idea' you've heard you haven't studied the problem. Having done so myself the most fucked up idea I've heard is trying to ban it. If a replacement can be found that reduces victimization of children, let the pedophile have free legal access to it.
Banning desired things NEVER works no matter what it is. Someone will always then make money providing it as with illegal types of pornography, drugs, etc..
Legal stats show when pedophiles have legal access to simulated child pornography they 'make due' with that instead of either seeking real human-involved porn, or worse, actual real-world children to victimize. We may not like the truth, but pretending it isn't true doesn't help protect children.
Pedophiles are always going to BE pedophiles. They are not curable. The only way that they can be dealt with and maintain safety for children is to lock them up. Your "legal stats" are self reported, which means they are useless in a real world study. The fact is, no pedophile will ever "make do" with fake porn and the reason for that is they know what they are doing is illegal, they just don't care.
They feel that the child loves them as well and that no matter what laws are passed they do not apply to them.
I've posted links to scientific and legal sites with the things I mention. But I get the impression people with their minds made up don't bother looking at them. Be happy to go point by point with anyone who'd like to and give source info for everything I say, mention, or propose.
My wife is a PhD psychologist and her friend is the head of the Arapahoe County (Denver Colorado) Mental Health department. I will take their real world experience over a legal brief any day of the week. My wife's friend WORKS with them every day, and she must stay current on the literature, and she say's they are un-curable.