Legend of Krystal Forums

I do not have any special knowledge about the technical side of the question - but I think what you described is possible. But in practice, a generator of random characters is likely to give out... not the best result. Such characters will definitely lose to well-written characters who were invented by someone alive. It's the first problem that i can notice.
About sex sxenes. First of all, you need to decide - what will the game be based on. Will it be a harem game or something like a sim brothel. Simply because the players who come to play harem, for example, may not like that their girls will be fucked by some other people / creatures. Netorare is quite contradictory genre, for example. If it will be a game in the form of a sim brothel, where the girls are only "tools" for the protagonist, which he uses to achieve his goals - sex with enemies in combat or after that is may be acceptable. But this path can also have its own problems. You can also make "sex after the fight", one of the options for recruiting opponents. If they are, for example, girls (with the protagonist). Or not, if you want so.
I think, this is all that i can suggest on this early stage of development. So far, at least. Sorry for poor english.

The "other brothel sim" might be Strumpets or Hentai Sim Brothel. I don't remember recruiting people outside of the slave market though. You can do that in SimBro though, at the bar.

Maybe look at the way Dwarf Fortress and Noxico are set up, they both have randomly generated citizens, but they are mostly text based. The Sims is also a lot like this.

Another way to interact with your party and maybe do sex scenes could be to write something like the Personal Actions or whatever they are in Star Ocean. You go into a town and you can decide to keep your party together or let them split up. If they split up, they'll go hand around town in places that pertain to their character. In Star Ocean this is all scripted, but you could make a random version too. Like, give people a random personality, or random likes and dislikes and have places that match. Like a spiritual character might hang around at shrines, a person who likes drinking might hang around in bars, etc. You could even have "moods" that affect their behavior, like if a person has been taking a lot of damage in battle, they might go to a spa or somewhere relaxing, or if one of your party members just permadied, someone might go to the graveyard or shrine to mourn for them.

To me, doing a game like this sounds like it would be better looking and easier to make in 3D. This actually sounds a lot like something I want to make someday.