then why does it exist in the damn setting
It doesn't. Not to the level that some people have been talking about, certainly.
The worst examples are the form-fitting chest pieces of the medium and heavy armours in DA:O and the scooping necklines of the leather armour, but since the male armours don't have those, it can reasonably be assumed that they don't quite fit (or the male armours don't, to be fair).
There is even a specific statistic for armour and armour penetration, which implies that armour coverage is in fact important within the game world. Given that, one can then reasonably assume that nobody would want to compromise that protection by leaving their vital areas unprotected.
The robes and Isabela's outfit don't really count as armour, and the Qunari in their shirtless attire seemed a bit out of place in DA II when they previously had all been wearing heavy armour. Overall I would say DA II was worse about this than DA:O was, although the armour options for the PC were (as I recall) no worse.
Everything else I've seen is basically just going in circles, even this point really. I didn't see anyone argue the point about relative popularity of Japanese vs. Western games in Japan and outside of Japan after my most recent attempt. It exists in one instance and not the other, that is evidence that while a handful of people such as yourself like those settings for what they are, most people don't, and if you want to make a game that appeals to most people, you would make a game with those J-game kinds of aesthetics. I'd agree that sometimes more realistic outfits are attractive, but unfortunately those are mostly in Japanese games also.
Because it is only relevant if the one and only thing you care about is cold hard money statistics, and because I quite honestly don't feel that I have enough information to argue about it. I don't have sales figures for most games, and I don't know exactly why or why not people wouldn't be buying Dragon Age games in Japan (although people have pointed out that they've done so, and also, there are several obvious reasons that would cut down on sales that have nothing to do with the realism of the setting or the armour -- poor translation, difficulty of purchase, et cetera).
It's a group of people like X and Y, and a group of people that like Y. There is still, as far as I can tell, basically one person who only likes X (Remmirath). Additionally, much of the stuff in category X had plenty of sexualized stuff (Annah, Morrigan, Desire Demon, mabe even Sera a bit in DA:I). Rather than argue these points in the abstract, I personally just glance at the evidence and go, yeah, ok. I believe it's personally because of a bunch of nefarious reasons which I've highlighted, but it doesn't even really matter what the exact reason is to me, one is clearly more desirable for people in the aggregate. The continued attempts to lecture and criticize every attempt at supporting a more female/sex friendly atmosphere illustrates that BW is clearly not the hero we're looking for in this respect.
The fact that the people who like both X and Y like both does not invalidate their opinion that they prefer this game to be X. Annah, Morrigan, and the Desire Demons are all irrelevant to this conversation, because not a one of them is really wearing
armour. Annah comes the closest, but like I said before, really nobody in
Torment wears armour. Aside from Vhailor, who
is armour, Dakkon comes the closest -- and doesn't wear what I'd consider practical armour, either. So, it's still internally consistent.
... Nefarious reasons? Isn't that a bit much? Also, I don't know why you insist that sexualised armour is more female friendly. That's just a bizarre viewpoint to me, and I fail to see the connection between sex friendly and sexualised armour. Dragon Age already seems pretty sex friendly to me.
Also, nobody is saying that BioWare is any kind of hero. They're doing better than many gaming companies. That's it.
Also no offense but that abstract reason as far as I can tell is that sexualized outfits are ok basically anywhere (Silly western games like Saints Row, all Japanese games, all comics, all comic based games) except DA. It's a very small exception at this point, and I suspect thats largely because all this restraint in one area requires satisfaction in others. Heck, even in DA I'm sure (Desire demons use sex to kill, Morrigan's a mage). It's basically only warriors in a Dragon Age game as far as I can tell.
It's like has anyone ever modded Morrigan's appearance into a more conservative one? Uh huh, didn't think so.
No, there are many other things where it makes no sense. Any game that's going for a plausible, semi-real-world sort of atmosphere. Certainly any game or film or illustration actually based in history or depicting history; that sort of armour would obviously be completely ridiculous in a historical RPG, or real-time strategy game, or anything like that. People specifically exempted superhero comics; I'd tend to agree with that, because they're pretty outrageous in every single way, and I personally can't take them seriously at all. Comics as a whole, however, no. That depends on the comic in question.
So, basically, I'd say that revealing armour has no place in any setting that is intended to be taken seriously. We could argue about how well Dragon Age does that, but it does clearly have that intention. Revealing clothing is different. It can make sense in the same setting which revealing armour doesn't make sense in, because it's not meant to protect.
As for Morrigan's appearance, there's no need at all to mod it, because it's only her starting outfit. I know that many people don't keep her in it. I certainly didn't. It's already something that is optional. Did many people mod Isabela's appearance? I don't really know, not having followed DA II as closely. I know I installed a mod to equip armour on NPCs as soon as I found one, although that wasn't the only reason (I like being able to change their armour in general).
this is as nice as I can be about this. what you like or dislike something has no effect on if it makes sense inn the setting. in fact the moment people in plate didn't die horrible deaths form being cooked alive by dragon fire every complain about armor stopped making sense. ask an old D&D fan about the heat metal spell.
I'd like it if armour type had some effect on resistance to fire, electricity, and so forth. That would make sense. One of my favourite systems does have metal armour transferring shock, cold, heat, and so forth, and that's among the things I love about it. The more realism the better, I say. By that same token, people wearing less protective armour should be more at risk for damage and injuries.