Quote - And there is no TOS violation here to show the nude torso with nipples, right, as long as the nudity flag is on?

Right. Just so long as:

1.  If the image is posted in the gallery, the thumbnail doesn't show the nipples or areola, or pubic hair or genitals or bare buttocks (even with a thong panty)

2.  The character does not look to be under the age of 18 years old. For purposes of 3D images, age is largely, but not exclusively,  determined by how old/young the face looks. For example, a set of 99 ZZZ boobs on a character that looks 12 years old in the face is considered a child.  Whenever I've seen an image in the gallery that looks "young", it's usually with Aiko. With her slight body and the fact that so many merchants play up the "child-like" features (large doe eyes, larger forehead), she often looks quite young.

"It is good to see ourselves as others see us. Try as we may, we are never
able to know ourselves fully as we are, especially the evil side of us.
This we can do only if we are not angry with our critics but will take in good
heart whatever they might have to say." - Ghandi