I had one hatch like that about a month ago. The cyst just kept getting bigger and my husband ended up culling it at a week old - it was forcing it's wing to grow in a straight down position. I was sad because it was one of my only 2 BCMs to hatch.
I also had a banty chick hatch with a smaller one on it's rear leg. That one didn't ever get any bigger and as far as I know the chick is still alive.
These were from two completely different hatches/ breeds so I'm not sure what causes it or if they even had the same thing.
It just hatched a few hours ago so not sure if it bothers it or not. It is seperated in a small bowl with a soft cloth so the others can't step on it. It is not peeping any more than a normal new chick so I don't think it is pain.
Mu aunt who lives with us is diabetic so I may get one from her.
It is one of our eggs so is either pure RIR or RIR/Golden Comet (I think). This is the 4th set of eggs I have hatched from our birds and the first I have had this happen.