Now is the argument pedophilia is bad or is the argument present actually the collision of different cultures taking their own stance on a subject? I'll talk about the derailment topic first.
Could the avatars look like children? Sure, but that doesn't not mean that they are viewed as sex objects by the creatures, maybe something as cute or sexy, but not to have sexual intercourse with. For instance in the USA there are toys sold to little girls that promote motherhood, baby dolls are just a small example, and what comes to our mind is usually "adorable" or "cute". What doesn't register is "She will make a great mother right now, better find a good husband for her." Now if the Avatar in the game was running around in a bib, rattle, baby bottle, or a doll than that would be of some concern. At the moment, I just see a clash of culture, not what is moral. As for the main topic...
I wanna get this off my chest real quick. In the worst case scenario the women in MMO's are dressed as are high class escorts, NOT prostitutes, whores or strippers. They wear pretty damn expensive and quite frankly beautiful pieces of clothing that would, of course, catch the eye of a patron. The bras arn't frilly or extremely vibrant. I can't even remember the last time an actual thong was worn as a piece of armor in an MMO. At best there are a handful of examples of "Bikini Armor" that exists in MMO's which are usually hard to get. As for being "practical"....*sigh* When a guy who in a full set of armor fights a creature that is far more powerful than a T-Rex...you expect me to think that anything about that situation is smart or practical? In most MMO's you'd be dead long before reaching lvl 10 considering what is thrown at you and you want realism and practicality in Armor only? What of the guards that send you on B.S. quests to do THEIR work for them? Or saving an entire village or city and all you get is XP sometimes....
I'm just saying that realism and practicality in a game is either never going to happen or is total B.S.
p.s. NPC's don't count. They are already gods and can pretty much be naked and still take hits far better than a player in elite tier gear.