Yes, there are hentai visual novels. With Japan's relaxed attitude about doushinji and expressions of sexuality, there is a strong public market. I've heard tales of people visiting Japan and seeing people reading erotic manga while waiting for the subway.
Yet just as there are more non-erotic stories in America then there are erotic stories, the same goes for Japan and the rest of Asia. Visual Novels were created with the idea of the breaking down a story into scenes of movement, something like a cross between a slideshow and a movie, becoming more movie-like as technology progressed. The advanced Visual Novels can have multiple endings with multiple paths taken to reach those endings - these are exactly like the "Choose Your Own Adventure" books found all over the world.
There is also a level of interactivity above even this, which is really more of an "Interactive Story" then it is a "Visual Novel". If you're into console games, Xenosaga is a good recent example of this idiom.
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