I think the part about the king wanting to exert control is irrelevant here - the point is that blokes very rarely compliment the looks of a man, they remain silently impressed in fear of being suspected of being gay or making a pass at the other man in question. Can only imagine this was even more so in Willy O' Winsbury's time, so it's quite significant that the king expressed himself in the way he did (i.e. by offering the hypothetical "I would sleep with you if I were a woman"). He could have made the same point by saying "You're a fine looking chap, I'm not surprised my daughter likes you," but he didn't, he invited everyone to picture himself and Willy in bed together.