He is (was) only afraid of the 'oversize' breasts. Hard to tell with that armor though. Might be a little awkward for Stagwolf to be slobbering over his host's daughter, but there has been weirder ships that sailed the sea of Drowtales.
the boob thing was a mistake on the character development part from the get go too many people didn't seem to have the mental capacity to see past a comedic aspect of a character that was barely ever touched on in comic or in RPs and was very likely he was just faking it to begin with
Lok isn't aware his daughter even exists anyway and it's unlikely they'd ever run into each other. Stag-wolf doesn't give a shit about gender or boobs that old concept art is invalid at this point and shouldn't be used as a reference for his character