The poor designs were deliberate
It's one of the only ways the game didn't get nixed before being made.

FATAL takes place in a Feudal World of Warhammer 40,000 lost to the Warp or a Slaaneshi daemon world.
Rape, violence, absence of logic, general screwedness...

FATAL is an Eldritch Abomination in tabletop game form.

FATAL was made completely seriously.
Because I can think of no theory more insane

FATAL was intended to be the polar opposite of Exalted.
This theory was put forward on the RPGNet forums. The suggestion was that Exalted is a game about pushing the boundaries of the world it's set in; the main bad guys' empire is said to be against the natural order of the world, the various good guys want to remake the world in their own image, etc. Exalts have the power to just ignore the rules they don't care for, be they social, societal, or even sexual. The game says you can go forth and do whatever you want, and challenge the universe to stop you. What you do with your character's sexuality says a lot about who they are as a person. The game gives you the space to be romantic or celibate or to indulge in weird, kinky sex. If you want to, you can wander around and rape people because no-one can stop you. Whatever you choose to do, it says something about the character. Maybe you think sex is a distraction, or a good time, or a way to terrify people and hold power over them. The choice is yours and the rule book doesn't say anything about sexuality, just giving you the same guidelines as for other exalted social interactions, namely 'Do what you want' and leaves you to it.

FATAL, on the other hand, is a game that is similarly about pushing boundaries, but instead of giving you choices, the book tells you exactly what it expects you to do. It only takes until the second page before it's salivating over the prospect of raping a chained-up maiden instead of rescuing her, and it flat-out tells you that over half of all men in the setting have raped someone, and that they are seldom if ever punished for doing so. The writers do all the transgressing for you, including giving you rules for raping people during fist fights and working out the damage from forcibly inserting things into people's orifices.

Exalted gives you power and freedom and allows for transgression to arise organically from game play. Sex doesn't have to even come up, and if rape does appear, then the other players are likely to step in and hand out punishment; they're heroes after all, and while one player might be an evil son of a bitch, the others are strongly likely to stand up for the little people in the setting. That's what heroes do. It's an emergent part of gameplay: you can go there or not as you decide, and so it's a meaningful exploration of where rules come from, and why being able to get away with breaking them doesn't make it ok to. It's a dark subject, but the game assumed that if the players want to go there, they can handle it with empathy and maturity.

FATAL expects every game will involve raping people. The only women in the book are whores and rape-victims. They say that no-one gets punished, and that HALF (!!!!) of all men are rapists. It says that you are expected to rape, and that it's no big deal. No-one should think about it too hard, just keep on raping. It tells you that it's just a normal and accepted part of the setting. If you rape someone, it's not expected to be a plot point; in fact, you can probably get experience points for it. FATAL thinks that raping someone is the same as fighting bandits; they even use the same rules. It takes away the choice of the players and removes any possibility of treating the subject with any degree of humanity and compassion. FATAL thinks that you're playing the game wrong if you don't rape people. It doesn't think you should learn anything from it, it doesn't think you should even think of who it happens to as human beings.

Exalted wants you to understand the meaning of freedom and power, and that while some rules are created by petty bureaucrats to keep the people down, others are universal and that hurting people weaker than you is wrong. FATAL demands you subscribe to its own creepy attitudes on women and rape, giving you a formula for working out exactly how badly you hurt someone and reveling in how much 'damage' you can do. In philosophical terms, the two are polar opposites, and there's a reason why one of them is the worst game ever made.

FATAL's designers aren't messed up in the head.
Saying they are would be too damn obvious for a WMG. What would be more shocking than it turning out the writers are the complete epitome of Innocent Bigots.

FATAL's designers had a similar fate as the designers of Action 52.
Too little time, too little training, and either the possibility or obviousness that it was rushed and most of the content was thrown in at the last moment. Only difference? Action 52's designers weren't so desperate to appeal to whom they thought would like it that they'd make their game as offensive as possible.

FATAL is complete and historically accurate...
In terms of perceptions. Remember that big roleplaying game scare, when moms were saying that D&D was Satanic and whatnot? This game is the stereotype they unconsciously created of tabletop games, and they were trying to protect their children from that. The sexism? Girls were stereotypically perceived as dumb in the olden days. The racism? Look, it happened. In all, it's a massive Take That! at the people who romanticize the olden days, with a healthy heaping of sex, sex, and sex in an attempt to be Anvilicious.