I was listening to a lecture by Professor Edward Ayers and he claimed that in slave markets of the south there were sections dedicated to "fancy girls". Slaves that were specifically intended to be purchased as mistresses or concubines of slave owners. He further explained that these girls could be inspected "more thoroughly." Is this accurate? Was this acknowledged by larger Southern society? What were peoples attitudes towards it?
Most of what follows is from "Cuffy," "Fancy Maids," and "One-Eyed Men": Rape, Commodification, and the Domestic Slave Trade in the American South by Edward E. Baptist.
Most of his evidence comes from internal correspondence between men involved in the slave trade and discussing the "maids" (women selected for sexual slavery) or "one-eyed men" (male buyers of these women). Their letters and ledgers show that their firm was most definitely and deliberately marketing slaves into sexual bondage as part of their regular business dealings.
The short answer is that this market did exist and there was an entire industry around sexual slavery involving these women. In response to a poster below, one of the men involved, a Mr. Franklin, expressed preferences for "mulatto" or lighter women. The owners not only detail their many sales of the "maids" to the "one-eyed men," but joke and correspond in a way that implies they kept some women for themselves.
A lot of Baptist's analysis involves how and why these women were turned into sexual commodities and objects, but that seems somewhat outside of your question.
As far as reactions, he argues that slave traders were portrayed in contemporary media as despicable and more unsavory than plantation owners, but that the men of Franklin's firm were more connected to Southern society than some analyses at the time were willing to admit.
Abolitionist or anti-slave trade literature did in fact use stories of nude women being examined or assaulted in speaking out against the slave trade, so these events were known enough to be used against the slave trade.
Observers going back to the 1790's remarked on the much higher prices that lighter-skinned, attractive women fetched during auctions and were well-aware of the sexual implications. One such woman was sold by Franklin's firm for twice the rate of a field hand, and the men of the firm wrote about needing male buyers and their demand during times of financial duress.
As far as other reactions at the time, someone else can chime in with more detail, but Mary Chestnut, who was a Southern Socialite and at least puts herself forth as someone "in the know" comments on the fact that Southern society and especially white wives took notice of mixed-race children in the South and knew their source, but didn't comment on it in public. Ken Burn's Civil War Episode 1 quotes her on this, but her writings are all over Civil War literature, especially earlier literature (top down material).
I hope that somewhat answers your questions. The article itself is worth reading, but delves a lot into commodification and the psychological aspects of sexual slavery.
Follow up question: Children between a white man and a slave is often still a slave. Would female slaves who look white because of this, be treated differently in this market?