It remains a controversial topic oddly enough, so it might be interesting to talk about it.
To me it seems rather odd that games that are actually made with a focus on sex are always cheaply made, no big studio ever dared to go there.
And on the other hand there's many, especially japanese, games that focus hard on sex appeal, but don't have the balls to actually show anything. They'd allow clothing to be torn, rediculously skimpy outfits and what not, but oddly enough female nipples and genitals always remain covered often against all logic.
Rating systems also seemed rather skewed when considering that Mass Effect 1 was given an 18+ rating for an extremely mild sex scene that shows nothing, I believe maybe a bare butt but I am pretty sure not even that.
While I personally would have no interest in any game focused purely on sex, it does bother me when games like dead or alive show bouncing boobs and rediculoudly small tops, but don't have the guts to actually show a nipple.
I'd compare that to a movie where a couple has sex, but oddly enough the woman feels the need to keep herself covered up under the sheets afterwards, as if affraid that the guy she just had sex with might see her boobs. It's just not realistic.
Neither would it have been realistic if Dr Manhattan in Watchmen did not walk around naked, considering he grew distant from being human but would wear clothes to be considerate to others if need be. So yes, I would want that realism for both genders while I'm not attracted to men.
But going back to videogames, I think that there would be a market for games that do include sex or nudity, but also other things. It needs to be more than just that. For something like the Sims it seems very fitting for example. A more mature competitor to the sims could be very succesfull I think.
They could just straight up go for an adult or mature rating for it, maybe excluding children and aging to prevent problems with that and just focus on adults.
Could still help your controlled people to make a career and persue hobbies, learn various skills, but sex could also be very much part of that life. It would be up to the player to turn the story of their character into whatever they like. Wether it would be like a sappy romance novel, a cheesy porn movie or somewhere in between. This would appeal a lot to both women and men so it would appeal to a very wide market despite the mature rating.
Something else that I could see happening for some games, is two versions being released: One with an adult or mature rating due to nudity maybe with sex, and one version that has those things censored. That way a very broad audience could be reached too. For something like Dead or Alive that seems suitable.