[snuxoll]

The method of which they produce the fetuses is never explained in the franchise, and considering they'd want to maintain genetic diversity it's probable that they simply harvest gametes from mature humans in the power plant and incubate an embryo.

There's also the whole "cycle" thing that's apparantley gone on for 6 iterations, allowing humans who reject the matrix to leave and periodically cull them was a solution to widespread rejection of the system that would have affected entire crops of humans. It's hard to do that if they don't have physical bodies to escape the system in the real world.

[devrandomguy]

When Neo disconnected, the machines just dumped him for recycling. That is consistent with the machines eliminating humans who develop connection problems (mental disconnect with the Matrix), but it still doesn't account for the humans' bodies being grown and maintained in a nearly functional state.

What really bugged me about their scheme, was the suggestion that a human might make a decent power source. Perhaps that was all misdirection, and the humans are actually the computing substrate of the entire system? Maybe the machines were never able to compute at the power efficiency of a human brain? Maybe they suck at nanotech altogether, and can't even design a decent microchip without human assistance? All their stuff is big and bulky.

(5 minutes later) Lol, I can't believe I guessed it. Thanks to deegles for the background info.