You understand Tsukuyomi wrong. It doesn't literally work like matrix where your mind is transfer'd in a virtual reality.
It is more like brain washing, people will be doing the same things as they do now just that their actions are more controlled, it's like their minds are reprogrammed, bad parts of their individuality will be erased and replaced with new better traits.
Their beliefs into what happen'd before whats happens now and what will happen later is erased, controlled and edited.
In essence creating a virtual reality in the real world so it's basicly real reality.
They will still have *** and children ect.
The difference is if the newborn dies at birth it will die but the parents and everyone else will think that it lived and continued it's life (no pain).
Murder will be non existent since nobody will have a cause and even if it did it will be reprogramed.