Speaking as a het male, when I use a female character as a partial self-insert (and I prefer doing so over male characters) I generally want her to do double-duty as lust object as well. This creates absolutely zero cognitive dissonance in me. (Whether that's because I can keep the roles of self-insert and lust object separate in my head, or because I'm assuming that if I were going to be a fantastic woman than of course that would include being the sort of woman I as a het man desire, I can't say.)
At the end of the day, it's absolutely true that we need to retire the term "Mary Sue" as a term which has moved beyond the limits of redeemability. But it is equally important to continue to try to redeems those characteristics (other than bad writing simpliciter--and hey, if you want to try to redeem bad writing simpliciter, power to you) which at times the term may have been understood to denote.