How do i use a renderable array to create a list with children render arrays
I think what you are expecting is logical. But from the definition of theme_item_list() you can see that it expects value of the data key to be just HTML and hence prints it as it is. I could be wrong here and there is probably a hook_preprocess_* somewhere that pre-renders each item of the list.

Either way, an approach that should work is rendering your item before adding it to the list by calling drupal_render() yourself.

// .. your code .. //
$container_elem = array('#type' =&gt; 'container' ... );
$render = drupal_render($container_elem);
$row['item_list']['#items'][] = $render;
// .. your code .. //