I've run a few querries on the database. All stories with more than 3 reports, and more than 33% reports to stars ratio have been reverted to
private status. That's approx. 200 stories.
There is no need to
delete stories because they can be reverted back to private status. Some stories might be unfairly voted off as well, or they may be irrelevant for most people but not "offensive". The author will be understandably angry that their story was deleted. Because there is no separation between a shared story and the private story, they're one and the same, just a different status, it's better to "reset" a story to private status. The author also gets a chance to adapt his story.
That said, it's always been the case that if you come accross something downright unacceptable such as stories with racial discrimination, you can
contact me directly and those stories
do get deleted permanently.
To authors seeing stories with sexual content reverted to "private" status, I suggest writing such stories in a more suggestive, and tactful manner. I'm sure they wont get as many reports. There is a good example from decamerOn for "valley". It's among the first 1000 kanji so surely it was read many times, yet there are 19 stars and no reports (though I wouldn't be surprised that it might get one or two now that I pointed it out.. >_<)..
I'd like to add that when I finally get time to finish this, the goal of moderating publicly shared stories is to improve the
quality, not to judge as to what is offensive or not. Stories with sexual or otherwise considered "offensive" content to some people, will need a specific treatment with "filtering", similar to Google lets you filter the search results.
After all that is said, off the 200 or so stories reset to "private" status, at least half of those have nothing to do with filtering. There are plenty of off topic comments, non stories (including the famous "See book." from yours truly

), stories with no primitives appearing in them, stories in Japanese or other non english language, ... and the odd ASCII art ( "(.)(.)" ).