Generally speaking, I am against the sexualization. To a certain extent. Let me explain why by hitting each of the three points of sexualization you touched on:
1. Sexy unlockable costumes: On the fence. They take away little from the game as they are always optional. I don't care if the developer likes to dress their dolls in lingerie and I don't care if anyone likes to look at those dolls in lingerie.
2. Wet clothes that get see through (read: actually look like they are wet): Big plus for me. Adds very effectively to the atmosphere and from what I can tell doesn't actually make it very see through at all. Especially in a horror game, this effectively adds to the weight of the environment.
3. Excessive boob jiggle - Not only does this have no place in a horror game, in my opinion it doesn't even have a place in porn (outside of some very specific fetishes,) it looks stupid and isn't even sexy.
Are you trying to say that sex appeal makes a character look powerless?
Can add to it yes.
I think... that says more about your outlook on sexuality than anything else. I sincerely doubt they added jiggle physics to add to the horror atomsphere.[/quote]
Jiggle physics, no. That adds nothing. Unless they are going for that unique form of creepy that happens when attempted sexiness falls deep into the uncanny valley.
But sexuality, properly used, can communicate powerlessness. Personal sexuality is one of the most private things associated with a person. For many people revealing their sexuality is an experience that makes them feel emotionally vulnerable.
Horror games are all about making the player feel vulnerable, usually by sympathy towards the avatar. A good game will utilize both physical vulnerability and emotional vulnerability. Consider the example of the wet, clinging, partially transparent clothes brought up by the OP. It isn't that sexy and is, in reality, only a little bit more revealing. The effect is fairly subtle, but it adds a level of emotional vulnerability through sexuality. The modest and sensible white blouse is suddenly more revealing than was intended - and the character has no control over the matter. It's not much, but it does to add to the general feel of vulnerability and helplessness.
I think it is also worth noting that sexuality can also be used to communicate power. Like in the case of Bayonetta, where her sexuality makes her a significantly more powerful presence.
Sexuality, male, female, whatever, is a tool that can be used to a variety of effects and purposes in game design.