I don't think the developers were really scared of offending anyone - This is a game which features scantily clad latex-fetish nun assassins, a whole host of questionable gay jokes, strippers that get violently raped and murdered and a mentally disabled man getting left to die of dehydration in the desert (or brutally murdered depending on your choice). Absolution was the most politically incorrect Hitman game to date, but as a consequence it also felt like it was the most juvenile. Showing full nudity in a strip club would not have helped to alleviate this overall feeling of immaturity if you ask me. I think Tore Blystad did an interview in which he said they never meant to offend people (this was after The Saints controversy) but they were certainly uncompromising in representing the above things.
For me, the Hitman game that handled sexual themes in the most abstract way was Blood Money. Very unusual use of sexual themes but also quite thought provoking. 47's strength in that game is that he was "uncorruptable", so to speak. The bombardment of horny characters and outrageously proportioned men and women were designed to make you uncomfortable and overwhelmed rather than aroused and titillate - Thus making you, as 47, feel like even more of an outsider.
Me too, I'm certainly no prude, but I also think that using female characters solely as a way of titillating the audience runs the risk of objectification. You mentioned The Witcher 3 earlier - This is a game that shows nudity in various ways, but it also handles its female cast respectfully. Characters like Triss Merigold and Yennefer of Vengerberg are fully realized three dimensional characters who feel fully independent of Geralt, who show initiative and courage and other qualities - And will only get naked once or twice during certain scenes because it's relevant to the story. Obviously they're not sentient beings, but they're treated by the designers and writers as humans rather than objects. A lot of games would benefit from this approach, and I think that given the moral greyness of a game like Hitman it's not in their benefit to have a game where the player can murder hordes of nude women en masse.
I don't necessarily agree - American media is incredibly prudish about sex. Any amount of nudity will guarantee you an R rating, but the MPAA have even gone as far to slap films with NC-17 ratings (usually reserved for pornography) if they show a woman enjoying a sexual act that is being performed on her - Even if the details are off camera. The traditional narrative is that we are so prudish about women's sexuality that it can't be featured prominently in any sex scene!
Also, even in an intelligently written show like Game of Thrones, they throw in a lot of nudity that some viewers have remarked to be excessive. There's even a term for it now (sexposition - a sequence of exposition that takes place during a sexual encounter) that HBO appear to be masters of. I have no problem with sexually charged sequences like this, and the nudity didn't really bother me. What bothered me more about Game of Thrones was the constant use of rape as a way of making the point that a male character is bad. Yes, I get it - Ramsay Bolton is an evil bastard, and Sansa is a victim. Do you really have to treat us to a rape scene to make a character more sympathetic and another more detestable? There are other ways, folks!