I picked "Other" simply because my answer is complicated.
I read and write mainly about fantasy characters. I was actually going to choose that answer when I remembered The Orgy and the Mary-Sue Virus.
I read a Phelps twincest story once (by accident - don't ask), and I felt very conflicted afterwards. On one hand it was arousing, but on the other it sorta squicked me. I thought I'd never write about real people, and then The Orgy happened. I also happened to remember a story that I wrote with my best friend when I was in high school that involved the two of us going to a concert, meeting the band, and ending up living happily ever after in true fairy-tale fashion.
I have to agree with Pixagi about being weirded out about writing (and reading) smut involving fellow board members, but I rationalized it several ways - It's excellent writing practice, it's consensual, and it's all based on our alter egos (which are kinda like fictional characters anyway). After a while, it ceased to feel weird. As far as the Mary-Sue Virus, those are fictional characters, which are based on aliases, so it's even further removed from the realm of real people.
I have written a true self-insertion piece as well (for the forum's anniversary contest). So where does that leave me? Somewhere in the gray, morally ambiguous area I suppose.