It's a sad commentary on our culture but fanfic has sexualized every popular movie, book, fairy tale, even kid's stories imaginable. I'm willing to bet, although I'm not about to look, that there are multiple stories available that involve the three bears having their way with Goldilocks, or the dwarves with Snow White, etc. Hell, there's an adult Muppets movie out now. It's so much easier to change what's already been created than to create something original, and sex sells.
The younger generation has mostly not read Tolkien and only know the movies. For them, Tolkien has only ever been a visual event, and they're only aware of the skeletal story that's presented in the movies. LOTR with nudity and sex doesn't cheapen the story in their minds, most don't know anything more than the cheapened version anyway. I enjoyed the movies, but I don't consider them to be Tolkien works, they're just loosely based on the world he created.