The whole idea of Data being "fully functional", why? I could accept it as maybe Dr. Soong providing Data with a working electronic phallus (hah hah) so that he could provide functioning sex (although crippled) to a potential mate.
Well, if we go with the novels (and they do a reasonable extrapolation of Soong's motives), he fully intended to transfer himself into an android body the same way he did Juliana (and in the books, he did, having tricked Data into thinking Lore had killed him a wee bit sooner than actually occurred).
Soong being human would wish his new body to be capable of all the things that gave him pleasure in his human existence, so I can see sexuality in Data being a test run.
He's also a rampant egomaniac... even if he never fulfills his dream of electronic immortality, he gave his sons HIS face and the ability to pleasure women beyond their wildest imaginations