My only explanation for Heinlein is that people may have had a private opinion that he'd gone off the deep end by the end. To Sail Beyond The Sunset is not so much a book as a trainwreck. I can't come up with any better description of it than that.

I think it depends on if LKH knows about all the incest male authors have written approvingly, or at least slobberingly while pretending to disapprove. I simply don't think she has any kind of moral compass regarding her fantasy worlds at this point. If it's "edgy", she wants in on it.
Eh... she still has some neuroses that are uniquely her own. I got the impression that she genuinely freaked when a commenter in the Reddit AMA asked why Anita didn't raise her mother to have a chat. Which you'd think WOULD be an "edgy" thing to do, but she basically said that she wasn't even going there because Anita's loss of her mother was based on her loss of her own mother.

Her fetishes are based on dominance. Sex is only another form of dominance in the Anitaverse. By freaking out the ~prudes~, to her mind, she's probably exerting power over them... but incest? The appearance of it, maybe (see Cynric), but I'll bet for now that she wouldn't touch the real thing. Since everything in her fantasies is self-referential, she'd end up bumping up against her own familial relations in one way or another, and I don't think she'll cross that in her own mind. ...though, frankly, I could be wrong. I would have never guessed anything like Shutdown would emerge into being, either.

I hope the fairy kids are just shipped off to live with relatives, though, and never show up in the books. It would be terribly storytelling, but preferable to anything I can imagine LKH doing with them.
YES I THINK THIS IS THE BEST ROUTE. Seriously.