Personally I think there should be limits...if you walked out into the middle of the street with someone and started doing sexually explicit things, you would expect some serious punishment if you got caught...but simply expressing affection in public, well, unless there's some extreme strictness, most people have no major troubles with it.
Chances are if you are going to have sex, it will be in somewhere a little more private/secluded, meaning that you may as well do the roleplaying of it over IMs or something...in most situations, the general public doesn't know when people are having sex, nor do they really want to know.
However, I think that if there are going to be rules against explicit sexual roleplay, then there should also be limits to violent roleplay. Obviously this would be hard in a game where most people walk around town carrying weapons (usually increadibly rude, unless the're a solider/bodyguard), but I don't think it's really appropriate for kids to be around situations talking about some F***ed up violence when they can't see anything sexual, it's unfair and promotes a moral view of "violence is ok, but don't show sex, because that's strange and unusual...the human body consists of clothing I tell you" just like the majority of Western movies I've had the unfortunate experience of watching.
