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Indeed. The ones I used to work with, (GDIT VZ series), used compressors running helium as refrigerant. That said, they fit just fine in the 1 meter shoebox scenario but on the wrist might be a little tougher.
While your points are certainly valid, they do little to mitigate the need for FIPS when dealing with things like FBI CJIS data. Either you're in compliance or they disconnect you. It's sort of like arguing with a TSA agent; it'll make you feel a little better but it won't actually change anything.
While the fact the Navy is compiling the data is concerning, the information they're collecting is public record. Newsflash: if you get arrested, everyone can know.