Yeah, it's a very difficult market - you get so many awful games simply because almost all of them are made by guys with a bit of game development experience in their spare time, or as a mass-produced quick-sell by some porno studio who discovers they have some bedroom coders on the staff (I'd guess).
It's very rare to find someone like Jak with actual talent and dedication, who can also output enough with a small husband-and-wife team to be able to make a business out of it, as you're getting no support from outside. Mainstream (or even backwater) publishers won't touch adult games as they're mostly in it for the profit, and there's such a small market for these sort of games that they wouldn't see enough of a return. Equally, as Jak mentioned, there's the moral double-standard in the US that 'sex bad, this is a Christian country, won't someone think of the children' although violence is free-for-all.
(Personally, I think it's really sweet that you and your wife work together on this Jak, I hope it brings you closer together! I'm a Christian myself, although I'm not entirely sure where 'virtual erotica' falls within that worldview, I fully support a loving marriage and I'm also a gamer with a passion for the industry and keen to encourage people doing what they love within that world!)
I'd suggest two possible options to the publishing dilemma, although both with a risk:
a) Look for publishing in Europe:
Although there aren't that many big-budget publishers out there, there are quite a few big developers, particularly in Poland and Russia, maybe Croatia, and you're less likely to run into the institutionalised anti-sex mindset, although the risk of a smaller publisher goes with the risk of a potentially corruptly-funded publisher.
b) Look for publishing within the adult entertainment industry:
There's plenty of big-brand porn studios out there with lots of money! Show them a really good concept of a game (like Sex Sim!) and prove that there's a market within their demographic for it, and they're more likely to publish and set up a full dev team for your game than an actual game publisher!
Downsides: a porn studio is set up for publishing and distributing DVDs, not games, and might not have a lot of the resources you'd need to expand an adult game team. Also, the staffing problem is still there, I'm sure there's a whole bunch of nerds working behind the scenes in the porn industry, but finding the talented ones that won't make your game end up looking like some student's 3DSMax 1st year project (who aren't trying for a job in the mainstream games industry) is the tricky part!
It's interesting you mention the old adult Sierra games Jak, it's bizarre how something like Leisure Suit Larry has fallen from cheeky, Carry-On-style adult humour to the modern 3D incarnations horrible misogynistic frat-boy 'jokes' that amount to 'hur hur boobs dildo!' Even then though, they're not quite the same as something like Sex Sim which is a full, uncensored sex showcase, more simulation than game really. (Although I prefer that to something with more gameplay, like, say, Bonetown, which tries to shoehorn in slightly obnoxious game mechanics when you just wanna see sex!)
Mind-spill over
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