What the hell is up with fandom? Are we all such perverts? Is all this creative effort (however skilled or not) just another substitute for self-gratification?

Well, I'll point out a couple things: one, sex/romance is usually what the canon we're dealing with DOESN'T have, so fanfic could fill that void. Also, I think sex is a natural part of life, and at least where I am (the US) it really doesn't get talked about in public much, or at least, it is certainly not a topic that gets talked about freely. So I think that is part of it - the internet provides a forum for a subject that it's talked about much IRL.