All the fancy coloured livebearers have been produced by breeding brother to sisiter, father to daughter and mother and son.
If they were not done then you would not see the colour full fish we have now, they would be drab greeny gray fish with just a little colour.
They will all breed together and will produce healthy fry. If you do get a deformed fish, remove it, so it dose not breed back to the others and add poor gene's which increse the odd of deformed fish in the feature.
Guppies have been in breed for the last 110 years (Still going strong), Platies and swordtails for more like the last 60-70 years.
Best thing you can do to reduce problems is every year add a couple of new males so new blood in introduced to the colony now and then.