I don't mind the idea of a content/ morality clause.
DriveThruRPG has
content guidelines and the ability to report violations, and has removed content for violating its guidelines in the past.
Paizo also has rules for it's
Community Content policy, which allows you to use its IP.
Most gamers are good, decent people. The vast majority. But there are A-holes in the world. If even 0.1% of gamers is a racist monster, heck let's go with 0.01% of gamers... with tens of millions of D&D players out there that's thousands of bad apples. The more popular D&D gets, the more likely someone will make a flagrantly racist or offensive 3rd Party product.
(I'm also biased because I've been spending a lot of time in the White Wolf fandom of late, and there are a LOT of fascists in the Werewolf community. And a lot of people pissed the more flagrantly racist aspects of Vampire the Masquerade were edited out for V5.)
Pretty much all laws exist despite most people being decent. Most people aren't murderers, but it's a good idea to have laws against murder on the books. Most people are racists or sexist, but it's good to have a policy protecting the hobby against those that are.
There's a lot of people who really want to make offensive content under the auspices of making things "adult." Not just stuff like the
Book of Erotic Fantasy, which was adult but largely sex positive and tasteful, but offensive.
As an edgier example, Lamentations of the Flame Princess is already walking the edge of good taste. It wouldn't be hard to imagine a similar product that actually crosses the line to misogynistic. Someone like the
RPGPundit is already a
content creator. (It's uncomfortable reading his Twitter page and seeing arguments made here against WotC and the policy being discussed sandwiched between some pretty reprehensible thoughts.)
So far, D&D has avoid such products really garnering attention, but it's only a matter of time before one is published. And it's better to have such an exception in the license and never use it than have someone do a d20 OGL version of FATAL or full of white supremacy dog whistles and not be able to do anything about it.
There definitely needs to be steps better outlined in the policy, with WotC contacting the publisher and seeing if things can be edited and revised. WotC has several examples of content that seemed like a good idea at the time. And the vast majority of publishers should be willing to fix content.
Maybe giving better examples of offensive content that crosses a line or examples of content they might not approve and might encourage people to rethink but that won't result in a ban (like racial ability penalties). And clear wording that adult content is fine, so long as it's advertised as a mature product and isn't hateful towards vulnerable groups and minorities. Queer content should be fine and should NOT be targeted in any way, and this should be explicit in the license.