Wow this has turned out to be a pretty interesting thread...
When I play games I really don't have much a moral standard to follow. To be honest something like this really wasn't an issue until a few years ago. Games I played growing up were pretty wholesome and fun, and even the most violent stuff (Doom) pales in comparision to todays stuff.
I agree with Rob to an extent about acting evil in games. For me its hard to do. Sometimes I can play a game as an evil person, but I really don't like killing innocent maidens and such. Yet that is why I really enjoy playing games like Jade Empire, Fable and Black and White. These games give you moral choices in extra-ordinary circumstances (videogames)...basically while I would never dream of performing acts of cruelty in real life I might just be able do something evil in a game. Though I might regret it after the act is done. It proves that the little angel and devil perched on my shoulders are still working to keep me in line...in both life and even in games.
I really think its what separates videogames from other forms of entertainment. In movies and TV shows you are just along for the ride, but in a game you can literally control the outcome. Some people fear this, while other embrace it.
What I'm trying to say is that if I saw a person playing Manhunt and enjoying it, I wouldn't think less of that person. Its a videogame that allows a person to perform grotesque crimes that the person would never consider in real life. I could actually see it as carthatic to some people. Yes killing people online in Halo or Counter Strike is viable outlet of anger to some people. I would much rather that person blow off steam in a videogame than perhaps strike his wife...just a thought.
Also I think sex in videogames is a subject people consider too taboo. I have been recently playing through my old PC adventure games and these include Leisure Suit Larry. I first played LSL, when I was about 13...I thought it was the greatest game on Earth. You played a cartoon looking guy who was this loveable loser that was trying to get laid. It was hilarious and the situations were so outrageous that it couldn't be taken seriously. The puzzles were brain taxing and the gameplay was a hoot. People got in an uproar over seeing some pixels that looked like boobies...if that made people's blood boil I hate to see what happens with sex in 360/PS3 games.
Sex happens in real life and its not an evil act like killing someone. If it happens in a game it usually doesn't bother me. That being said, I really don't need to see the sex actually happening and if its implied thats better than seeing polygons do the horizontal jengo fett. For example Kratos (God of War) gets to partake in a threesome mini game about an hour into his adventure, and its all done with tongue planted firmly in cheek. It added humour to a very serious game and it was a welcome addition.
These are just my simple views on the situation, and I have really enjoyed reading everyone else's responses. I'm glad to see that some people still have really high moral standards...the hardest thing in this world is to believe in something.