If you are born abroad and settle in the country of your citizenship there should be a way to classify your citizenship as "other than by descent" through registration some how. I am officially a UK citizen by descent (born abroad) but I think I can register as a citizen other than by descent if I go live in the UK again for a certain period of time. I don't have kids so it makes no difference to me so I haven't really done the research into this. They will know how you got your citizenship because of a) Your place of birth, clearly marked on your passport and b) Where your birth was registered, if it was registered at an overseas consulate you obviously obtained citizenship by descent.

If two parents both have non-transmissible foreign citizenship by descent and their child is born in a lex soli country other than the one of their citizenship ("easy countries", e.g. USA, Canada, etc.) the child should be solely a citizen of the country of their birth. If the child is born in a jus sanguinis country but the parents are legally resident in the country, most countries have a law which allows the child to become a citizen of that country regardless of their parents' nationality. Furthermore, almost every country has a law that allows children born in that country who would be stateless to become citizens of that country as a sort of a catch-all. If there are more complicated circumstances which the local laws do not recognise (e.g. parents are tourists in a country with very stringent nationality law), the parents would most likely have to appeal to their country's consulate for assistance. The laws limiting transfer of citizenship by descent are to prevent mass immigration of "returning citizens" and abuse of the system, not to ruin the lives of peoples' children. Every country frowns on statelessness, there will be some solution.