I'll put it to you this way. Just like making arguements for perfect equality, perfect safety is impossible to achieve in any kind of free society, or heck in any kind of society dealing with a large number of people to begin with. Online services and games give you a rating for the content put in by the developers, all of these services tell you that this might not be reflective of what you see online due to other people.
As things stand now I think things are too limited. I found the idea of things like "Second Life" fairly boring, but I did like the idea of free expression to begin with even when it went into some rather taboo and sexual areas. It took a good long while before I began to think things might have been going too far, but even then I tend to think free speech is more important in a general sense than outrage because someone made moving pictures of children involved in sex or whatever.
I feel we need strict policing IRL, and in cases of real sexual assaults/pedophillia/whatever but I am comfortable with the idea of information networks being a "wild west" of sorts. Sure some people will abuse it and get truely offensive, but I believe it rapidly becomes a greater evil to actually stop them.
To me, someone being "sexually assaulted" in a game is absolutly ridiculous. This complaint is akin to someone trying to sue because their corpse was teabagged in a FPS game. Heck in that case you could make it a doubly whammy because not only is it a sexual assault, but can also be a disgrance to your religion and/or customs in dealing with the dead, both of which have been big real world/"meatspace" issues.
To be honest I sort of lost interest in home during the development. Originally when it was going to be like a more advanced "Second Life" with user created content I was interested. However about the time one of the devs started talking about how they wanted it to be like Second Life "but without the naked people in the sky" it was downhill from there. Without any desire to police it actively (which would be wrong) they rapidly removed a lot of planned features like user developed content. Besides, who would buy clothing and such if they could just make their own? They basically seemed to build something similar to "Habbo" with minigames. I've gradually been trying to build up the ambition to finally login to it with my PSN account, but really I keep deciding not to and doing something else due to not really seeing the point for the most part. Chat Modes strike me as being nothing new, and that's fundementally what "Home" is.
At any rate, to get back to the point and wrap this up, the person making the complaint is after five minutes of fame (or at least attention). It's a sad state of affairs that she actually got it and had something like this taken seriously enough to even make it to "The Escapist". It's even sadder that I could actually see a case being made out of this if the right factors all aligned. Someone like Hillary Clinton or Obama could promote such incidents as part of a springboard towards getting people to agree to more intense goverment censorship.
Simply put, in any free enviroment some people are going to be jerks. That's just the way it is. The jerks are comparitively a small price to pay compared to what you would lose in establishing enough control to stop them.