I think it could definitely be done, but only three ways, and under certain obvious rules.
The rules would be this:
1: The game could only sell to adults, so the rest of the game content would have to be aimed at that market
2: The porn in the game could not be the main plot or selling point. It would have to be a simple occurance. You couldn't make a video game based around sex. It wouldn't sell. It should basically only be used to add realism, as described below.
3: The developer would have to consider the sexual orientation of the players, which would make nudity possible, but actual acts would have to be carefully designed, and consentual. By consentual, I mean that a lewd movie scene involving any sexual act would need to be completely optional, if existant at all.
The ways it could be done, which would work, are as follows:
1: Remakes.
Imagine a pornographic version of mortal kombat (can think of a title, swapping the o for u and adding an h but won't say it). Basically, the only difference between it and the original would be that the characters are nude, and the finishing moves (fatalities, etcetera) would be either altered or expanded to include certain acts. This poses quite a few eithcal problems, however. In this example, the main focus of the game is violence, which would insinuate that any acts between characters is rape. That makes this example a probable no-go on the market, though many people would still buy it, it would never get a major market share.
2: This possibility has some serious potential. The idea is to make a game specifically marketed for adults, but not specifically marketed as porn. The game would be like many other games. It would have a genre, plot, be at least somewhat character based, etc. The nudity or pornographic matierial in this case would simply be used to add realism. Basically, nudity and sex happen in the real world, so if you are making your game as realistic as possible, it could happen.
For this possibility, I'll take a major title, and give an example of how it could have included pornographic matierial tastefully, and without taking away from the gameplay or content itself.
Consider Hitman (Code Name 47, or Silent Assasin)... If one part of the game involves going into a house after a target, certain rooms in the house could have certain normal activities. For example, someone may be in the shower, or certain things may be happening in certain other rooms. The realism of the actual target being engaged in certain activities when you reach them is even a possibility. It would be entirely optional to the player whether they would actually enter the rooms with the pornogrphic content. Just like if a real hitman arrived at his target's house while they were involved in some sort of lewd activity, Agent 47 could simply wait until the target finishes what they're doing.
3: Massive Online Games.
It has been requested by players numerous times, but no company has risked tarnishing their image to do it. The idea is an all adult server. On this server, language would not be so restricted, and naked characters would actually be naked, not simply sporting a default outfit. Certain emotes could even be added to the server.
All in all, this is the most realistically possible way to include pornographic matierial in a game without effecting the bottom line. Basically, all servers are open to everyone, but the adult server requires a password from a reputable age verification service. This would allow parents to buy accounts for their kids in the game without worrying about them logging onto the wrong server.
Here's the major problem, though. The media would have a hay day with it. I could see 60 Minutes talking for 15 minutes about how this immoral company included adult content in a MOG played by kids. They would probably mention for about 5 seconds that one would need a second account with a reputable outside company in order to access the taboo content. This would make less tech saavy or more conservative parents avoid the game altogether. The masses are inherintly ignorant. Many would simply pass judgement without listening to the details, or even caring to learn anything about the subject of their judgement.
For this reason, a company would have to be very careful how they introduced the content, and would risk completely screwing their public image. It could be done, but would be difficult, and would be a public relations nightmare.
