Buenro-games: So is SEXY dead?
Definitely not. But there have been changes.
We see less flaunting of body parts in AAA titles now. As an example, Bethesda's earlier works like Arena and Daggerfall included a considerable amount of pixel cleavage. Then, in Morrowind, modders who turned the game's crude humanoid models (which wore ugly brown diapers) into much better looking anatomically correct alternatives, were forbidden from even linking to their work from the game's official forum. Later, in Oblivion, Bethesda's marketing director Pete Hines vilified modders because some mod activated an unused asset which showed nipples.
The reason for this is that gaming _is_ a mainstream hobby now. When it was a niche/nerd thing, games could get away with a lot of weird stuff (in the eyes of the general public) because the rest of society simply didn't really care about them. Nowadays, games are multi-million dollar projects which have to be sold to a wide audience in order to yield a profit. If the ESRB gives a game an unfavorable rating, it means less sales. If Walmart (which has become extremely prude) decides to not carry a game, it means less sales. Thus, developers of AAA titles have become very careful about sex in their games.
Modern AAA games that do try to include sex, often do so in an absolutely pathetic way. A good (or rather, bad ...) example is GTA 4, where you can visit a night club and watch a stripper doing a completely non-sexy dance while your character cannot do anything. You can also have a girl-friend, have sex with her, and the game camera will shyly move out of the window while you hear the girl shouting "Oh yes, you're so good, you're so good". Players probably have to be 14-year old boys with zero Internet experience to find any of this sexy; as I said, it's pathetic.
You will find more sex-related games coming from developers that do not have to rely on the US market. Lots of Japanese games focus on sex, but they are often of questionable quality as well.
If you want to have 'sexy' games, you'll need to look at Indies - i.e., games where the developer's vision doesn't have to be compromised to the least common denominator of whatever the game's target audiences consider acceptable.
A good example is "Embric of Wulfhammer Castle", a free game that is on one hand an RPG parody, but on the other uses sex in very explicit ways. It's audacious in many ways, but succeeds due to its excellent writing. Note, though, that male characters play a very minor role in that game.
Another example is "Luxuria Superbia". This game is very overtly about sex, but dodges criticism by using abstract graphics and poetic allegories. This game is probably not "sexy" in the way you meant, though. But I think it's a very interesting way of approaching the topic. :)