Much has been said that what people want is not beauty but rather interesting characters in games (I'm focusing here on games with a strong narrative focus). References to Game of Thrones have been made, for example that Theon and Tyrion etc were compelling not because they were beautiful but rather their complex character.
I can get behind this type of reasoning. First and foremost plot and character should be at the forefront of the game design of narrative heavy games. This said there certainly does seem to be an uglifying trend in games, especially with female characters. It might be better to say that they are masculinsed.
This is justified on the grounds of realism. Brienne of Tarth is a good reference point here. If you have a female character who can take on a male character they would need to be muscular etc. The problem here though is that Brienne of Tarth is not in fact a realistic character. The probability that she could defeat Renly's best soldiers is minimal and even less fighting the Hound. Additionally, that her father would actually have allowed her to be a knight is ridiculous. The approach of Ned Stark with Ayra makes the most sense. Yes, let her train but her future role is wife and mother - this is what would happen in a medieval society which GoT is clearly based.
Societies, in general, will only have women fight in extreme circumstances. This is because you can kill most of the males and introduce polygamy and therefore replenish the groups population with a few males. You cannot do this with females for obvious biological reasons.
So you could create a dystopia in which you had rugged female characters who made sense in the world as they were needed to survive. But the probability that they could physically take on any men in those environments is deeply dubious unless you are going on the cyborg and bodily enhancements line. Most of these gritty stories with masculinised female leads are nothing but feminist fantasies and hardly realistic at all.
So the question is, if you go for realism properly women won't actually fit as an action lead for a game as it makes zero sense. I actually think characters like He-Man are more realistic than the "strong female" lead as it is just a male archetype and the archetype is rooted in reality.
If you really want to have female action leads in a realistic sense you need them to either have serious amounts of technology to use, like controlling a huge robot from the inside or in other worlds have them as witches/mages using magic. Both of these scenarios do not require masculinising the women to a large degree, especially the latter.
Obviously, if you want a pure fantasy where 7 stone women can defeat massive numbers of huge men, again you need not try to make them look realistic.
Now it is true that no-one is making it illegal to make games with beautiful characters but there is an atmosphere against doing that due to the dominance of certain groups in the media and this does make a difference.
Final random comment, some have said if you want beauty watch porn. The thing is, pornstars aren't actually that beautiful. Think about it, if they were definite 10s, in most cases they would have been picked up by a rich guy and not need to be in porn. Also if you look at their faces they tend to lack a high level of facial symmetry and golden ratios which are typically taken as beautiful. Compare the faces of porn stars and Miss World (or Miss America) contestants and you will see the difference.