"Create and share what you like" is correct for not just erotic literature, but all fiction. For those who seek it, someone who doesn't like it will seldom write it better than someone who does like it. And any fiction can be regarded as distasteful, so "is it distasteful" shouldn't figure into it. (Beyond the rules of the platform on which it's shared, of course.)
I would agree I've seen fewer fictional stories based on non-fictional celebrities. I was never really interested in them, because I think erotic fiction depends on feeling I know the characters well enough to empathize with them through its events. Presumably one point of using a celebrity is to import the reader's existing knowledge of them, but it's difficult to feel confident that I really know any celebrity.
I think anyone is entitled to fantasize about anyone, but I've always felt there's an ethical consideration when publishing stories involving a fictional version of a real person. If my story was based on an acquaintance like a friend or classmate, I would resolve it either by asking their permission or sufficiently anonymizing them. We're not usually well-enough acquainted with celebrities to seek permission, but they're still people deserving the same consideration, familiar as they may be with the ramifications of public figurehood. Some may understand shared fantasy is harmless as its typical readers do, and even deeply appreciate the authors' and readers' interest in exploring situations and feelings inspired by their presence and work, but someone with heightened consciousness about their own safety could be distressed or confused about a published story's real-world implications. So I'd at least make a special effort to affirm the strict fictionality of the work with something like a forenote, and I think I wish something like that had been more typical when such stories were commoner.
