Initially I listed some bracelets with modeled pics, and some without, and I started to notice that my items that were modeled had more orders and views, so I shifted to modeling all of them. (I include non-modeled pics as well in the listing.) I also state that all my items are washed prior to shipping (obviously *after* modeling them), so I think that answers any questions/concerns about that.
I'm not sure about the unsightly/hairy arm situation, but I do try to make sure that the photos are flattering. If there's a kink in the bracelet or a piece of lint in the background, I take another shot. (Some of my older listings were AWFUL in this regard, but I'm getting better at controlling the photography "set".) My photos still need quite a bit of improvement - and I seriously need to learn how to use editing software...once I download a free one - but I do think that I've had an upward trend since I added the modeled pics.
That said, I think I personally am more attracted to the non-modeled bracelet (and other jewelry) pics when I'm shopping. Personal preference, and it has nothing to do with any perceived "ick factor" about the jewelry, since I always presume that my item will be cleaned and/or a different item from the one in the photo.
I'm curious if any clothing or hat vendors have this issue, too? I certainly wouldn't want the same undergarments that were modeled, if I were purchasing that sort of item ;), but I don't think I'd be weirded out by a washed t-shirt. When I go to a commercial store, I don't know how many people tried something on, or what sort of packaging or storage it was in, so I always wash things first.
