To take each of your issues:
The amount of money required just to add a bathroom is over the top.
Not really. It doesn't take much to point at a head and say, "This is now the ladies room."
The bad air
The last I checked, women had the same basic physiology as men. They can breathe the same oxygen as men can, so "bad air" is wouldn't affect them more than it would men.
No more than on ships, really. If people don't have the Honor, Courage and Committment (yeah, I'm actually in the Navy, biatch) to control themselves, then they shouldn't be in the Navy any ways.
The thing is, there really aren't any more arguments against putting women on subs than there are for not putting them on ships. Actually, I'm wrong. One could argue that given the limited space, it might be harder to put in a separate berthing, but other than that, there's not much else I can think of.