I'm always astounded at people's capacity for stupidity and evil. This sort of horror story always sounds made up, simply because it's so unbelievable that anyone would do this sort of thing. And yet, it keeps happening apparently again and again.
Also, "shock value" is so trite and overrated. After Charles Baudelaire cornered that market like 150 years ago, if you are still thinking you are being edgy by being "shocking", you are just stupid and ignorant. Nothing so proves the inability to write and create by resorting to "shocking" elements. If your RPG seems like it could use a character translator between F.A.T.A.L. and back, you really need to reevaluate what you are doing with your life.
The really interesting assertion for me in this thread though was the idea that at some time in the past this would have been considered acceptable. I've never been into the Con scene, and obviously I'm a "prude" and a lot of things don't fly with me that might fly with some other groups (and I could list some designers as proof of that), but it's hard for me to imagine a group that I've been in which wouldn't get wierded out by some GM running a psycho-sexual scenario. Like we all firmly want to keep that sort of "role-play" out of our games, is one thing I think every player I've ever met would agree on. I can sort of get that some wierdo or crazy might go to a convention to get their twisted kicks, but is it really true that at one time this would have been brushed over as not weird?