The given verse is:
Lord Brahmā then gave birth to the demons from his buttocks, and they were very fond of sex. Because they were too lustful, they approached him for copulation.
Srila Prabhupada has clearly mentioned there:
Sex life is the background of material existence. Here also it is repeated that demons are very fond of sex life. The more one is free from the desires for sex, the more he is promoted to the level of the demigods; the more one is inclined to enjoy sex, the more he is degraded to the level of demoniac life.
So, it is to be understood that when the inclination to enjoy sex increases beyond proportion, it gives rise to homosexual tendencies between men and women.
What you have quoted is the purport of a different verse:
"It appears here that the homosexual appetite of males for each other is created in this episode of the creation of the demons by Brahmā."
The continuing line here is:
In other words, the homosexual appetite of a man for another man is demoniac and is not for any sane male in the ordinary course of life.
As for having sex with a family member; put simply, Adam & Eve, being creations of Brahmā, would be brother and sister.
As for demons being allured by the illusion of a beautiful woman, it is clearly stated:
When the inclination to enjoy sex increases beyond proportion, it gives rise to homosexual tendencies. Therefore, a male whose lust crosses beyond the normal attraction for woman, he reaches the homosexual tendency. So, he can also be attracted towards a woman, in a different position, to put it mildly.