They actually fixed this with the 2003 PROTECT act which only makes obscene simulated child pornography illegal. Because obscenity isn't protected by the first amendment this has been found to be constitutional.
It's hard to say that changed anything. Obscenity is a notoriously thorny subject in American constitutional law. The legal test for determining obscenity[0] is highly subjective and in the context of the internet very difficult to apply.
* Whether "the average person, applying contemporary community standards", would find that the work, taken as a whole, appeals to the prurient interest,
* Whether the work depicts or describes, in a patently offensive way, sexual conduct or excretory functions specifically defined by applicable state law,
* Whether the work, taken as a whole, lacks serious literary, artistic, political, or scientific value.
Also:
Critics of obscenity law argue that defining what is obscene is paradoxical, arbitrary, and subjective.
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I think it would be hard to not find generated child porn obscene by this test, unless you have a good lawyer, at which point there is plenty of wiggle room.
I think the technical feats involved in creating such a text-to-image program might allow a talented laywer to make an argument for scientific value.
There's also the issue that "contemporary community standards" are hard to determine, because what community you're talking about is hard to determine.
