i think your wife has a point. i realize it's torture for you and of course any involuntary reaction on the part of a certain...erm...prominent protuberance is unhidable. but you’re wife just doesn’t like clothes. and you know she doesn’t feel turned on just because she’s naked. and she doesn’t get naked to turn you on. it's a function of comfort, not foreplay.
at the same time, it isn’t exactly fair to you. and for there to be issues about you getting turned on...may i be frank?
that's crap. and you should tell her so. can't help it. get used to it. period. end of conversation.
so compromise, maybe? if your wife could stay clothed and comfortable, she should – at least every once in a while. and when she MUST be nekkid but doesn’t want your advances, then you should keep them to yourself…and that includes diddling yourself next to her on the couch
or going on about how sexy she is all nekkid like that and you jus' wanna jump her bones.
for the part about her frustration when you tell her that her body excites you...dude, that's tuff cause you just can’t get her to see that it’s true. i know how much she turns you on, and how much you tell her she turns you on, and how uncomfortable and provoked that makes her feel. perhaps you could tell her in a less overt way. use subtlety and hold back on saying stuff like, “you are the sexiest woman i know” too much. they’re pretty intimidating words, imo.