Not all of the sex scenes in hot coffee feature fully clothed women. In fact, they generally feature nearly or fully naked women. It is essentially like a cartoon version of late-night Cinemax. No penetration.
That said, I agree that changing the rating from what is supposed to be the equivalent of R to the equivalent of X or at least NC-17, over Hot Coffee is absurd. It was political pressure, pure and simple. Hot Coffee is the least of Grand Theft Auto's inappropriate content.
I beat the game about a week ago, btw. I consider it one of the greatest games in the history of gaming.