Second Life has serious performance problems. VR requires 90FPS or better, and SL has trouble holding 30. Or 20. Arbitrarily complex mesh content, a terrible level of detail generator, and single-threaded servers and viewers combine to hold performance down. The basic architecture is 15 years old, from back when servers had one CPU. Performance is totally unacceptable to the Fortnite generation.

The system can't handle crowds. Second Life is divided into regions 256 meters on a side, and starts to slow down when more than about 40 users are in one region. Regions are usually capped somewhere below 60 users to keep performance acceptable. This is a big, big problem. Anything really good that draws a crowd slows down to an unusable level. On top of that, there's a huge transient when a new user enters a region, and all their asset info is copied into that region's server. For historical reasons, the region servers do a lot of bookkeeping that ought to be handled by per-user server processes, and so, as users move around, they carry with them excess baggage which must be pulled out of the state of one region, sent across the network in the data center, and inserted into the state of the new region.

Sometimes transfers from region to region fail, and, as a result, traveling around in a vehicle results in a region crossing failure that disconnects the user. Typical failure rate is about 1-2 times per hour for a traveler. Much worse with multiple users in one vehicle, which kills travel as a social activity. There's a serious architecture problem in this area - region crossings need to be an atomic operation to work right, yet you can't lock up both regions involved for the time required. It's a difficult distributed transaction problem. So there are race conditions and failures. This alone gets the system laughed at in gamer reviews.

All this is quite fixable, but needs more staff resources than are currently available.

As for "the place seemed to get overrun by genitals", that's not really a problem in practice. That sort of nonsense mostly appears in a few social hubs operated by Linden Lab. Those are default destinations. If you don't have a home location set, you go to one of those on login. Only new users and the jerks who harass them go there. About the only time an experienced user goes there is if the region they're in goes down, which results in being teleported to a random social hub. Everybody else is on private property, their own, their friends, or that of some business, and the owner can eject and ban users from their property. Property rights make Second Life go, in a very real sense.

There's not much need for "moderators". Second Life does have a "governance" group. And what comes up as governance issues? Property problems. Users putting up giant billboards. Users with stuff sticking off their parcels onto public roads. (If it intrudes on a neighbors' parcel the neighbor can remove it, but that's not automatic. Having a tree branch or other landscaping hang over is usually OK. Like real life.) Obstacles to boats and aircraft. Pirated copies of in-world goods resulting in DMCA issues. User harassment sometimes comes up, but not that often, because the property rights system lets you prevent someone from entering your property, communicating with you, or even being seen by you.

If you want to do consensual sex on private property, it's not an issue for Linden Lab. Nor is it much of an issue for users. There's not much controversy in the user community over it.

The perception that Second Life is all about sex is a business problem. Google is anti-sex; you could not host SL on Google Cloud. Twitch.tv, which is owned by Facebook, does not allow video from Second Life. That's a big marketing issue.

SL's somewhat casual attitude on sex is alien to the current state of the web. The system has been running for sixteen years. Today we have a division between the sex-free world and the porno world, and that division has hardened considerably in the last few years. SL doesn't have that division, and that bothers some people. This may reflect SL being run out of San Francisco.