Have you ever heard the phrase "one bad apple spoils the bunch"? Because that's basically what this is. Yes, pedophiles are in the minority, but pedophilia is so reprehensible that most everyone does everything they can to avoid giving it any validation or avenue (as they should). So, to avoid even the possibility of validating pedophilia, children models should not be included.
This is also the reason why Lalafel tend to make people uncomfortable. From a human perspective, they have the bodies of children with the agency of adults. From our perspective, we can see no markers of sexual maturity--so when they start acting romantically with one another or towards one another, or as some have hinted, towards the Warrior of Light, it gets a little uncomfortable. In the universe, they are a distinct species, and are fully mature in their small stature, but that is abnormal for us as humans. Some people can get around that, some can't, and some shouldn't be allowed to.
Also, humans are (generally) sexual creatures--it's instinctual and hard-coded into (most of) us, and is no more abnormal than eating, sleeping, or pooping (in that it is a natural, biological function). Asking why people think about sex is like asking why people think about any of those things.
EDIT: That said, I would love if they added an age slider to character creation that ranged from college-aged (what most models now are) through middle aged, and into elderly. I'd love to make a badass old wizard, or a badass old warrior lady.
EDIT 2: I'd also like if they introduced the ability for cross-bred characters, though I realize the resources for that sort of thing would be quite intensive.