We will not work or do any form of business with ANYONE who has a .xxx domain. A lot of the big programs won't do it either.

We've also invested into some software that digs 20 links deep to search for a .xxx domain extention.

I guess you'd say we've turned racist against .xxx. We've suspended a multitude amount of affiliate accounts due to their association with .xxx.
It's been established into our TOS.
One site was shut down for arguing with us about them having one of our banners on their site sending traffic via a "hidden link." We sent DMCA's to remove the content. It's not approved and states it all over our websites. Even if you are using a banner of ours, it is not tolerated. It's unauthorized use.

I know Manwin is suing companies for having various .xxx domains.

If I were you, I wouldn't do it. Invest your money finding a non-.xxx domain. Also, it will save you the humiliation.