For point 1, restrictions are there because Ulysses likely deem those as disruptive to the Gem Hunt. A few stragglers are likely okay as they could be dealt with by Praetorians and be set as examples to the general populace when punished, but overall Ulysses likely doesn't want the "game" to devolve into a complete sandbox, not when the point of the VRMMO is to aid the Founder in his quest for the gems and to foster a competitive atmosphere as a means to accelerate the hunt.
For point 2, having sex with NPCs could potentially break the programming of their implants and bring back their original personalities or memories of when they were alive, potentially exposing the truth about the VRMMO to the public, which Ulysses obviously wouldn't want to happen.
For point 3, appearance isn't changeable coz of existing lore and media depictions regarding astral projections, which in almost all depictions are a 1:1 copy of the person's actual body.