M rating or not, a large group of the people who play this game are people under the age of 18. Like it or not, western society is very uptight about nudity and six, and while it's okay to decapitate and torture people to death, it's not okay to see briasts, and that can make-or-break a purchase.
I've noticed briasts don't tend to cause quite so much of an uproar (though of course they can). Now, if you get the idea of showing too much of a
man, then people start getting out the torches and pitchforks.
Doesn't go too far against your point, of course, and suggesting any combination of two of those getting too close to each other definitely gets people angry far too much more than it should (some combinations more than others). But seriously, when Daggerfall in 1996 can be far more open about those things than Skyrim fifteen years later...
As for Sheogorath, well, let's just say that just because a person has some kind of mental illness doesn't mean they're necessarily going to act like a blatant stereotype.