Lorne doesn't specify what he's talking about in terms of sexual relationships, obviously. Who's to say that Munch's Oddysee was the intended medium for this controversey? Wouldn't surprise me if it was, as the reproductive models of Glukkons and Mudokons would have been seen, but I don't see this or hermaphrodites being all that controversial.
Status was going to be an integral part of Munch's Oddysee gameplay, and Xav is right in saying that a lot of gameplay would involve possessing a Slig and using him to get into new areas. Examples Lorne gave of this involved situations where there were several levers that needed pulling, and while there were enough Sligs about, the only one you could possess was a much lower status than the others, so the higher status Sligs ignored their workmate when he told them to pull the levers.
So it's up to the gamer to control the Slig at work, get a nice wage and trot over to some kind of weapon/status Vendo, get a promotion, impress the other Sligs, and get them to pull the lever.
Lucky Neph, according to the latest Lorne interview, this is indeed what the Natives are going through.