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I guess, marginally. I definitely would rather stare at an attractive person for 60 hours over an unattractive person, but at some point the mechanics of the game take over and the avatar becomes part of the scenery anyway.

I would also point out that there's a spectrum at play here. Too ugly can be a turnoff, but too fetishized can be equally off-putting. I find excessive fan service in a game more distracting than a homely character.