Since they're undead, it's more of a slowly harming them kind of thing. Treat it in similar to feeling heat from a flame when you get too close, it feels hot and the closer you get, the more uncomfortable until it begins to hurt you. In that same sense is how the auto-healing which is a trait under "holy" that would be destructive to undead elements. The knights are specters, which is a type of spirit that isn't alive. Healing is meant for the living. Undead may be dead brought to life, but it's a "cursed" life, so the healing for the living is registered as holy damage to impurity.
Even if we'd like the idea of them becoming human, sadly this isn't possible without an ability to create, rebirth/life, or able to change something. Maybe if someone pops up with an ability of this level, that would be cool.
Damn why do you have to make so much sense
I'll still hold out hope, since OP abilities seem to follow the MC. Perhaps we can rank up No.1 and have her healing abilities regenerate flesh and organs. That's the good thing about this manga, anything could happen!
That'd be pretty neat, we can hold out hope! Let's light them hope candles!
Did they explain why the skeletons were feeling itchy, rash-like symptoms in the pax room?
If they didn't then I'm making it canon that the auto-healing ability is regenerating their flesh and we'll get 12 handsome men and or women. Amen