There are so many sides and aspects to this discussion that its hard to really pick a definitive way for how things "should" be. It is all relative and especially over the past several years sexuality and gender association has been questioned more than ever before. What is masculine? What is feminine? What makes a man a man or a woman a woman?
I have played video games all of my life, and have obviously noticed how women are sexualized, where beauty and revealing clothing are favoured over muscles and plate armour. But I think that is the way it is in all media - movies, TV, music, commercials, even in the books I read. Its unfortunate and not realistic to what real life is actually like - but hey SEX SELLS! And making money is often more favourable for people and companies than maintaining a sense of realism or integrity.
That being said, I obviously know that beautiful voluptuous women are not necessarily the realistic choice for a warrior or champion, yet when I played WoW or even Elder Scrolls online, I found myself (along with almost everyone else) choosing the human/elf races and making them in the image I thought was most beautiful... Rarely did I ever see any female dwarf characters running around in WoW, and when I did they were mainly all played by men as a joke. I think Wizard Zedd was onto something with the idea of making characters in the image we wished we looked like, or wished our ideal partner would look like. WoW (or Blizzard in general actually) is notorious for their curvaceous female characters, at least in Elder Scrolls Online you can adjust every detail of a person's physique... even then most female characters I see are shorter and curvy and most male characters are tall and muscular, because that's what people like to look at. It isn't necessarily the "right" way to for people to be, but I think that is just the way we are generally hard-wired, we like pretty things and pretty people because beauty often means healthy.
I certainly like the idea of making women strong and muscular if they are going to be swinging large swords (it doesn't really make much sense for a gnome or small man or woman to be using a two-handed sword), or men perhaps smaller and less muscular if they spend all of their time reading books and learning spells. Where do you draw the line though.. maybe the spellcaster can find spells to make his muscles stronger, maybe naturally large woman doesn't want to fist fight but wants to heal her party members instead... how do you utilize people's natural physical and/or gender oriented strengths in a game without putting them in pre-determined roles they may not necessarily want? Hmmm... tough questions.
Anyway, on a lighter note - I saw this video a couple of years ago and immediately thought of it when I saw this thread. It is similar to the other video (which was quite funny btw!) in that is pokes fun at and brings to light the ridiculousness of scantly clad women in a lot of video games. Enjoy!
https://www.youtube.com/watch?v=OTGh0EMmMC8
hahahaha, right Zed. it's up to the designer to do what ever they want. for me i'll try and stick to realism, like gravity still works, the grass is green and brown, rocks are hard, small characters have less strength, large muscles have lots of strength, a wizzard cast spells, etc. you have caught my attention with the speedo though 
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But, again, what sells? Compared to earlier games we now have a much more diverse choice of characters...will only keep improving I am sure.
