They knew perfectly well. And at the time, there was a huge furore over this, which just fuelled the controversy (I was a teenager at the time, and saw the film twice at the cinema - completely uncut in the UK, by the way, whereas the US version was significantly censored to get an R).
I saw an interview with Paul Verhoeven in Empire magazine, where it was put to him that his film wasn't politically correct. His response? A typically defiant "Fuck politically correct."
Frankly, I think it is a mistake to take Basic Instinct remotely seriously. Verhoeven knows the film is trash, and that it is beneath his talents. Yet he gives it a glossy sheen with great direction, A-list stars, and a stylish verve it really doesn't deserve (great cinematography and music score too). Quite honestly, I laughed throughout much of it, as Verhoeven is such a flagrant provocateur.