It was clear to us that not only should everything be consensual, but it should be personal to individuals: You could say, "These specific people are allowed to make love to me," but not, "Anyone in this room is allowed to make love to anyone else in this room." To this end, we implemented a fairly neat permissions system whereby every character had an attitude toward every other character. The default was stranger, which meant all physical contact was forbidden. Next was acquaintance, which allowed formal contact only. You could get to this stage either by setting it manually using a permit command, or by doing something that implied it; for example, proffering or accepting a handshake. From here we went to friend (non-intimate contact), boy/girlfriend (intimate contact), lover (sexual contact) and, for the sub/dom community, master/mistress (unrestricted - they could control you as a puppet if they wanted).
Sex in the real world has biological consequences, the main ones being sexually transmitted diseases and children. STDs were present only when curable; you might catch chlamydia, but not AIDS. Children, we completely ruled out as an option; characters might suffer gameplay-affecting is-she-pregnant anxiety after a wild night of unprotected sex, but it would last a (game) month at most.
As for the sex act itself, we implemented it using a modification of the classic MUD combat system. Before you get all uppity and insist that it's disgraceful to associate sex with fighting and I should not be allowed within looking distance of women for merely harboring such thoughts (and I have, indeed, had people say that), let me highlight the word modification. The mechanics are similar (automatic exchanges of interactions, qualified by inputs undertaken during the process), but that's where it ends. For example, in a combat MUD, your actions typically determine how many points you get; in this game, your actions determined how many points your partner got. In other words, your partner benefited from your sexual prowess, not you.
Lest you gain the impression that the only interesting thing about this game was its subject matter, I'd like to say, categorically, right here and now, that OK, you're probably right. As a designer, I was personally very excited by some of the concepts we developed, but there are probably fewer than 20 people in the whole world who would share my enthusiasm in this regard; sadly, therefore, there's not much point in my boasting about it. I would, however, like to mention our superb system for automatically monitoring the ability of body parts to function.
For instance, take room descriptions. They would change on-the-fly if you were unable to see or hear or whatever; commands which required the use of fingers (such as playing the piano) wouldn't work if your fingers were restricted (such as they would be if you were wearing mittens). This worked across all sensory modalities and all components of the body (and yes, male and female bodies did have some different components). It remains cutting-edge stuff for textual worlds, but of course only designers are likely to care much about it; as a player, you just want to play. The reason I mention it is that although it's something that would enhance all MUDs, it was developed specifically in response to a sex game requirement: bondage. If you're blindfolded and have a horse bit in your mouth, you can still make out some of the environment ("hmm, that feels like the heat from a branding iron") but you can't always perform everyday commands ("I'd shout for help if it weren't for this horse bit in my mouth").