I have to agree with you, on the fact that her question (in my estimation) is truly not applicable to your situation. She obviously has issues if she says she's not willing to touch or be touched. Those issues can be dealt with if she's willing to deal with them, if she's not willing to...then it's unfair for her to expect you to accept an ultimatum like the one she put forth. That puts her in complete control of your R and it's not right.
Our MC once asked us the same question, my response was very similar to yours. If my H were paralyzed (or whatever) and had a legitimate physical reason for not being able to fulfill my needs that's one thing, then I know he's not withholding from me....there is an actual physical limitation. However, I know with my LDH it's a matter of him not stepping up and dealing with issues that need to be dealt with and using those as an excuse not to becoming intimately close with me....THAT is a choice of his in my view....I view your W's statement to be the same. She's making a choice not to deal with things that would allow her to get intimately close with you.
Also, how would she respond if you said something like this (I've said it to my H)...if you aren't willing to meet that need for me, then you'd better get ok with someone else taking care of it. I suspect she wouldn't like that either, for her D is easier than dealing with her issues.
So for me, would I be willing to live in a M where I have a perfectly able bodied spouse who could be intimate with me if he chose to be...but won't? NO. Sure I may love my H...but I also know I have needs that need to be met, when they aren't met it hurts, it affects my self esteem etc....that's not a pain I'm willing to live with indefinitely.
