Here is a group of possibilities around the "Prison Theory"
Azmuth may be a criminal, putting on a good face. Why do you thinks he's so paranoid?
11 species may have escaped, as Sludgepuppies have not been found. This is probably because their DNA is not stable enough to be absorbed.
This may have been addressed before, but the reason there may be no Xenocytes on the Omnitrix is because they may originate on Xenon, and Azmuth wouldn't of tolerated them being absorbed. This may mean there was only one, and they originate from cells slowly, rather than mass-produced
eggs, made by aliens.
It may seem that Incarcecon has only so much room.
Prepare for the next chapter...