My two cents, and how I've run Malks:

First, there are a lot more "failed" Malkavians than people realize, but the Malkavians tend to clean up their own messes. When a Malk gets permission to embrace, it's an open secret that they will kill the offspring if it becomes too broken to ever function in polite society, then try again until it comes out right. The Malkavians we see on Elysium are the ones that came out halfway decent. They're the survivors, and their childer will be judged by the same standard, perpetuating the cycle.

Second, Malkavians that survive...