Indeed, losing just sends you back to the church in general, with curable increases to fetishes/sensitivity. A lot of the girls involved in events get fleshed out nicely and a lot of them allow sex without getting sent back, though this sadly doesn't extend much to random encounters. I feel this most with Tengu and Blue Slime, though other "generic" encounters could benefit from being fleshed out.
Though in my case, I don't think this is a particularly high priority, given the sheer amount of work for the capital update.