Wow, I'm disapointed by No Doubt's reaction. Will DC comics sue me if I "depict Batman doing some suggestive testicules eating simulation" (teabagging) in a videogame?
My stupid examples shows that you cannot sue a company for what the gamers will choose to do with the tools available to them. Now, if Activision has no rights on the physical appearance of the band members whatsoever, that's another story.