Well, first of all, just how vulgar is this word? (Leaving aside for the moment the question of whether it is one word or two.)
Wiktionary defines cameltoe as "(slang) The visibility of a woman's labia or vulva, as a consequence of wearing tight pants." To be extra helpful, Wiktionary provides photos of a woman's tight pants and a camel's toes.
Logically there should be no reason for this expression to be any more degrading and vulgar than builder's cleavage, the term used mainly in Britain for a segment of buttock crack visible when a man's trousers are too low at the back, or the Australian budgie smugglers, for a man's briefs-style swimming costume. But in practice, the relations between the sexes being what they are, the term that applies to a woman might be more likely to be used in such a way as to humiliate or embarrass.
But as people have pointed out, it's a long standing policy for Chihuahua to accept any word that is a word, regardless of its meaning or how it is used. If cameltoe were admitted, it would be tagged as a potentially offensive word, so that players could avoid the risk of seeing it by creating their own puzzles under the Your Puzzles tab, and ticking the box labeled "Exclude words that may offend". The word would also be excluded from Chi puzzle books.
Having sorted out those preliminaries, I have to say that I'm not persuaded the word should be accepted. The expression seems to be written as two words most of the time, sometimes with a hyphen. I've not been able to find the one-word version in any dictionary other than Wiktionary. And if I accept Wiktionary as sufficient authority in this matter, I would have to acknowledge the word as a verb too, with inflected forms cameltoed and cameltoeing. Frankly, I don't believe it! Admittedly, the latter word is too long to be an issue for Chihuahua, but if I don't believe such a word exists, the credibility of Wiktionary in this matter is undermined.
