I could see her gasping because there was no genitalia there more than if there was. A sex doll's genitalia is pretty unremarkable.

@theburbs said:

I was reading trivia about this movie on another site, and it said Lars custom-ordered Biana with no genitalia. That doesn't seem right to me when you consider the scene where Karen lifts up Biana's dress to look at her crotch area, then gasps and closes her eyes as she turns away. I figured this was because she was seeing Biana's anatomically-correct genitals for the first time.

What do you think?

Yea that trivia site is wrong. Karen gasps because the doll is, as Lars's office buddy says, "anatomically correct". Think of it. Would you GASP if you took off Barbie's clothes and saw just legs ending at the hips? No, you would GASP if you saw a thingee there.

But the punchline is really in the scene immediately following Karen lifting up Bianca's skirt. Karen is with her friends talking about it, and one of Karen's friends says "So in other words, she's just one of the girls!" End scene. The whole mystery of what Karen sees under Bianca's skirt is punctuated with that line, and the audience suddenly grasps what Bianca saw. Girl parts.