I agree with what others said that more customization is generally good, but not all games really need that level of customization. For something like animal crossing, I think the body type thing is fine, since the designs are more neutral unlike what you're describing. I think what could help is a third option that's a more neutral body type. Or maybe if it's not relevant, just don't have a body type option.
I also don't know much about runescape, but I assume this was an update that just changed the names from genders to body types, so adding other options might have increased the scope of the update. I think at least uncoupling that from gender is at least an improvement over before. Plus, I kinda disagree that people would only pick the corresponding pronouns. Plenty of people have a gender expression that doesn't necessarily match their gender identity.
Yeah I agree with you there. If you're gonna just give two or three body type options and no other customization, there should be an androgenous option or at least they should all be generally androgenous. I think the issue with runescape probably stems from how the game was before.