Well, for starters this is a non-issue that should have been pretty much banned from geekdom long ago. The idea that women are somehow put off by, or offended by, these depictions of women in fantasy is outright false. Some might be, but they represent a tiny minority. If you've ever paid attention to what female artists and authors produce when aiming at women, it's as "bad" or "worse" than what the guys doing this kind of artwork do.
It's pretty much one of those straw men, where guys generally string up the idea of women being objectified as the reason why there aren't more women around for them to play with, also hoping that by doing so women will be more interested in them for being sensitive. That's really not accurate, and all you really have to do is look at the artwork of female fantasy artists like say Julie Bell, or read how some of the characters dress in say Kim Harrison's "Hollows" series, the "Anita Blake" series, or any of the other diverse "paranormal romance" and "modern fantasy" generes.
That said, the whole idea of having a set of visible equipment as opposed to what your wearing is an old one. I think "Anarchy Online" actually did it first with their social tab, but you can also see it in game like "Star Trek Online" with the abillity to disable the visuals of your equipment and be seen only wearing your clothing/uniform. The various "Super Hero" games also allow a free range of visual design with gear having no overt apperance effect, and apparently "The Secret World" is following suit.
To be honest though I have mixed opinions about the entire thing, to be honest in a fantasy game a big part of the idea is that your high end gear is being scavanged from tombs and such. Your typical AD&D dungeon crawling party DOES tend to look like a group of vagabonds which is one of the reasons why they can be identified as adventurers. A warrior might be using say a Kopesh Sword taken from an egyptian style tomb, while wearing an elven cloak taken from a forest adventure, gnome crafted boots of levitation, and a suit of armor thrown together by dwarves... all obtained from differant places. That's kind of the fun of an established adventurer is that his gear sort of represents a record of what he's done in his X number of levels of play.
To be honest, I think the problem in MMOs is simply that it winds up becoming uniform due to developers cutting corners with resources and not wanting to create a lot of parallel builds and gear. What's more with a limit amount of content everyone winds up doing the same stuff and getting their gear off the same loot tables... unlike a PnP game where even if the GM never wrote an adventure himself, you could say raise three differant fighters to 20th level on modules (easily) without ever repeting any content and wind up with a very differant collection of trophies and magical weaponry.
Accepting the limits of computer MMOs, I tend to feel that within sword and sorcery games, you should see equipment done the way it traditionally has been. If anything you just need developers to stop trying to streamline the game for casuals, as with simplicity comes there being "ideal" builds and equipment sets far too easily, and narrow equipment options produced to cater to the simiplified specializations. Make things a bit more complex, produce more gear, and move away from "tier sets" and I think that would be the way to go.
When it comes to science fiction and super hero games, I tend to agree that the apperance options fit in better with the vibe. For example in "Star Trek" you don't see everyone walking around in heavy armor, and loaded with gizmos. In super hero comics the character tends to have whatever he happens to need, oftentimes just producing it out of hammerspace or from "microcircuitry" or "unstable molecules" allowing it to be concealed in or somehow attached to their costume. Generes like Cyberpunk and Modern Dark Fantasy are the same, your various cyberpunk characters tend to have a lot of the details of how they carry whatever it is they are using glossed over from chapter to chapter, and characters like "Hellboy" somehow manage to stuff more garbage into their dusters than Batman at a Loony Toons convention (or so it seems).
To be honest there is still immersion in these games, no matter what handles people use, the characters should fit the setting and the genere, with the people behind them being what might break immersion during play. A fantasy RPG should be a fantasy RPG, other generes come with their own tropes. In some generes maintaining a distinctive apperance makes sense, in others it does not.
This is part of the problem with say being unable to equip your characters in "Dragon Age 2" since the whole "dungeon looting" is part of the genere. It's also why there is still some opposition to the plans for say "Dragon Age 3" with the apperance of an item varying depending on who wears it. Basically if you grab a magic spear off of a Lizardman Shaman then it should look like a bloody Lizardman spear if that's who made it, it shouldn't suddenly adapt a Zulu apperance or a Roman apperance depending on who handles it. Sort of like how the GM won't let you spontaneously reforge equipment in your typical AD&D game, you know like "gee, I'd be much happier if Excalibur was a Rapier" or "Damn Thor, thanks for letting me borrow Mjolnir for this quest to free you from those chains, but do you mind if I reforge it into an axe, giant runing hammers aren't my thing" or "Glowing black swords that moan with the souls of their victims don't fit my style, I'm going to choose to re-do Stormbringer as a dagger while I wield it".
I mean even in LOTRO where is your gear coming from? If your wearing armor from the floor of a barrow, it shouldn't look like something you had custom smithed to your personal specifications.
The point being is that as an issue/feature it applies to some generes, not all of them.
As a final note on the original topic:
As far as women walking around in sensible armor, understand that a lot of those "cheesecake" outfits are sensible. As much as people might decry it as being sexist, understand that when people were running around with actual weapons and armor like that and whacking on each other women were at best second class citizens because they just couldn't perform to the level of men... the exceptions to this being few and far between (though they do exist)
As a result you just don't have a lot of armor and weapons made for women, and when looking at the realities of such combat you run into a number of problems in terms of getting them to function properly.
In general this means that in fantasy when your giving men and women identical capabilities (ie ignoring the upper limits of physical performance and such), your left with the question as to what women are going to wear into battle. In general it comes down to trying to find ways for them to fight mobily....
One thing to understand is that all those super hero costumes people make fun of came about because in general doing physical activity like gymnastics or martial arts in street clothes is insane. Thus they wore unitards, tights, briefs, and similar kinds of outfits like gymnists, dancers, and other sorts wore, when "on the job". I've read quite a bit about the logic behind super hero costumes.
When it comes to fantasy though your looking at a similar logic, but left with the question as to what the lady in question could wear at a time when things like spandex didn't exist. This of course leads to thinks like briefs, shorts, and other costumes that aren't going to leave a lot to the imagination. You tend to look at say the "panty shot" as something off color in a modern context, but consider that you actually could justify a female warrior wandering around with a thong, and a very short skirt that doesn't restrict mobility us actually an attempt at a degree of modesty. I remember reading some stuff about the art of guys like Frank Frazetta and some other authors who had a lot of knowlege of athletics and in drawing the human body (there was a big thing about Frank in paticular in the special features of the "Fire and Ice" animated movie DVD as well) and why they did a lot of what they did in setting up some of these stereotypes.
Now, one important exception here of course is silk. Of course in a fantasy world that's going to be incredible rare an expensive. You might see something more akin to regular clothing (in the spirit of say a traditional black Kung-Fu outfit) in the hands of nobility or in an Asian setting for such characters.
It's like a post I wrote not too long ago about Mileena from "Mortal Kombat" in that whole "live action" thing. The costume doesn't work for be-bopping around in the middle of the modern 21st century, but at the same time a costume like that is exactly what you'd expect a female warrior who jumps around like that to wear in her own fantasy dimension.
I suppose in the end you could argue for intentionally modest designs, but to be blunt I don't think that's nessicary.
I'll also say that from the girls I've met online who play MMOs with costume options (and yes I've met some) I seriously doubt you'll notice a heck of a lot of differance. I play characters of both genders, and have dressed my characters up in some fairly pervy outfits, on the other hand to use "Star Wars Galaxies" for an example it was a girl (and actual one) who taught me the "trick" of wearing hot pants and nothing else under a duster to make your character look functionally naked under the overcoat. With the social tab in that game, lets just say none of the people I knew of who were using that look in the final days were dudes. That doesn't mean ALL girls do that kind of thing, but it does mean that there is such a thing as being overprotective, and projecting sentiments that just don't seem to be there. It's one of those things where what people talk about in forms like this one, do not match what people actually do in the games themselves.
The minute I see jiggle physics being touted as a major selling point I lose all interest, no matter how good the game might be.
