The structural properties of crystalline Si nanodots embedded in a SiO2 matrix are investigated with respect to the exploitation of quantum confinement effects (QCE) in Si solar cells. The nanostructures are grown on crystalline Si (c-Si) wafers by decomposition of substoichiometric SiOxNy layers with various [O]/[Si] ratios. Cross-sectional high-resolution transmission electron microscopy investigations reveal the formation of separated single crystalline nanodots with diameters below 5 nm inside the SiOxNy volume and directly on the c-Si wafer. The density and diameter of the nanodots decreases with increasing [O]/[Si] ratio, leading to inter-dot distances above 10 nm for [O]/[Si]>1.3. Photoluminescence (PL) spectra are blue-shifted relative to the Si bulk PL, which is in good agreement with theoretical QCE models. It is found that for observing the PL signal the nanodots must be covered by a SiO2 shell to reduce charge carrier recombination via defects at the nanodot surface. This requires an [O]/[Si] ratio >0.5 for which the inter-dot distance becomes too large for charge carrier transport between the nanodots. It is concluded that a better control over the nanodot formation at high [O]/[Si] ratios has to be achieved before QCE can be successfully applied in Si solar cell devices.