The thing is that only the person who is swapping with someone notices the swaps. So from Tim's point of view he sees Jon as girl and while there may be an awkward scene when it comes to sex, Tim would only see Jon as a girl. Jon having breasts because of the wish helps.
The reason why Jon and Karyn works is because regardless of the swaps they are still the opposite gender. Also as Karyn has the stone she is more likely to believe Jon in terms of him being a boy. And this kinda proves that regardless of the swaps, Jon and Karyn love each other no matter what.
Hope that makes sense
