I think you're generally on to something. Yes, there are things that awareness-of-interest can make awkward. (I suppose the trick is to be, and hang out with, people who are utterly shameless and who have a good mental separation between nudity/touch and sex.)

I have, in fact, lost friendships over telling someone I had the hots for them. Even very disclaimered, very nonpresupposing, very "I'm perfectly cool with it if you're not interested" hots. On the other hand, those are a vast minority, and all the friendships that either stayed basically unchanged or gained connections/priviledges as a result made the risk worth it. I generally tend to err on the side of honesty; the trick is to _mean_ it that you'll be ok if the snogging never happens, and you won't go all weird after the words are out.