yic- The Ramban disagrees with Rashi and says it is not talking about arayos, its referring to abstaining from permitted things. (I did say there are other pshatim)
See what R’ Frand writes (from Torah.org)
“…The Chasam Sofer points out that whether we accept Rashi’s interpretation or the Ramban’s approach, the message of this mitzvah is one of abstinence. One could perhaps erroneously come to the conclusion that the only way to achieve this level of sanctity would be to lock oneself on the top of a mountain in a monastery. One could think that one should ideally have nothing to do with people; one should not get married and have nothing to do with the opposite gender at all. The Torah therefore makes clear that the “holiness” of a monk is not desirable. This section was specifically delivered “b’hakhel”. Everyone was present – the men, the women, and the children.
One must be a Kadosh [a holy person], but one must be a Kadosh in the context of the congregation and the community. One must get married and one must raise children. One must play with his kids and spend time with his family and be a part of the community. The Torah wants the holiness of complete human beings.
The Kotzker Rebbe used to stress “MEN of holiness you shall be to Me” [Shmos 22:30]. “G-d is not looking for more angels.” The Torah was not given to angels [Brachos 25b]. It was given to human beings who have wants and desires and are social animals. In that context we are commanded to develop holiness.
Therefore, specifically Kedoshim Tihiyu, of all mitzvos, was relayed in a mass public gathering to emphasize that despite our obligation to achieve holiness through a certain degree of abstinence it must be in the context of the community, together with one’s wife, one’s children, and one’s neighbors. “