From what I understand is that they were in many cases hand-picked for this unit. The SS leadership thought they would be particularly well-suited for the role of anti-partisan and rebellion suppression in mostly civilian areas.
My question being, has a unit such as this been formed in any other time period?
Could you elaborate on what type of precedent you mean?
Do you mean, essentially, penal battalions? Composed of men who had criminal records or were deemed especially violent? If so (I know wikipedia is not an official source, but to get a very rough understanding) here is a list that might be a start.
Otherwise, if you could expand, I'd be very interested in seeing a more knowledgeable source here too.
The earliest I can find is Régiment pénal de l'Ile de Ré, formed in 1811. The British Army, for the Peninsular War, was supposed to have offered service for freedom around a lot of prisons, but for lesser crimes and they didn't form exclusively criminal units.
"Galvanized Yankees" were CSA prisoners, of tepid loyalty, who volunteered to serve in units in the West - not fighting the CSA - to free up more trustworthy troops for the Union.
I am having a hard time looking up actual information on this unit (the 36th Waffen referred to in the OP) because apparently they are the darlings of white power music on Youtube and elsewhere. Quite depressing. Can someone point me to a good resource?