The problem with sexuality in games is that it's basically handled poorly almost every bloody time. Now, Sturgeon's Law dictates that 90% of EVERYTHING is crap, but that means there's almost a full 10% of portrayals of sexuality that still have no excuse for being handled so badly.
The cause, I think, is the nonsensical rating system and general ignorance on part of legal guardians. On one hand, the ratings for games is asymmetrical to movies when it comes to its content, forcing developers/storytellers to abide by very different standards. Public outcry for the errors of some dolt who hands mature content to a six year old likewise adds unwarranted pressure.
The result: sexuality is systematically deconstructed into traits which can fill checks in boxes. Some boxes are acceptable, others are not, but so long as enough boxes are filled the devs can say they added it to the game. Problem is, this means it's handled poorly almost universally. The process almost doesn't allow for it to be handled well, and those who actually pull it off are more easily dismissed as statistical anomalies than acknowledged as brilliant storytellers who understand the boundaries given to them.
I think, in time, if sexuality was given more leeway, it would actually be handled better. While it would inevitably result in more gratuity in the medium as well--perhaps more pornographic genres pushing the new boundaries--there would at least be more games where the sexuality can legitimately be recognized for its artistic merit. So far, I haven't really encountered that. I've just seen games that handle it so much better than the video game norm, yet falls quite short of actually being worthy of praise.