This is something I have thought about a bit when designing such things for my own games. One thing that friends tend to say is something like, oh you should implement a system such as "XYZ" where if you lose then something lewd happens. As much as it is a mechanic in its own way, it feels odd from a developing view to make there be a reward for actively trying to lose. There are a few reasons why such things can be done though, most notably, that the failures themselves offer a lot of opportunities to insert something lewd as for a lot of games, there are more opportunities to fail, than what their are to win. Like for a platformer, for example, most have reach the goal as the win objective, so theirs only one opportunity to implement lewd content as a reward, however the level can contain multiple enemies, a timer and even thing like pitfalls, all each having their own opportunity to implement lewd content as a punishment. Or at least... those are my thoughts as to why its possibly done.
Incorporating lewd mechanics into games can and is done well even outside of the defeat equals sex, many of the games I am seeing either incorporate these as their own systems or even just as flavour, which is equally enjoyable. There are also other examples outside of this jam where defeat has its own gameplay elements too so even losing can be incorporated well into the overall gameplay idea.
Defeat having interesting gameplay elements works okay if there’s no effective penalty for defeat. I can definitely see how it’s hard to fit content into a game in other contexts, especially if the “game over” screen is the only opportunity there is for action to pause in some way; I think that’s something that makes it easy to implement “sex as an obstacle”, too – obstacles are expected to disrupt the flow of a game.
I’m more impressed when games work their sexual content into the game rather than leaving it out of its flow. I think that’s much easier for adventure games, text-based games, visual-novel-style games, etc. than other genres, though; sexual content needs room to be fantasized about, since current computer equipment usually lacks appropriate interface devices to snuggle up to you more directly, Rez aside.