In my teacher training, we had a lengthy discussion about this during our ethics section. We were essentially instructed to do what we needed to do to not bring this sort of energy into the studio. It greatly compromises the important teacher-student relationship, detracts from the yoga experience (despite how flattering it may be), and is grounds for all sorts of trouble. From my standpoint, your teacher appears to be in gross violation of the ethics of our profession, especially as many view yoga as a sort of healing/spiritual profession - there is a power play going on to some degree, even if it's subtle. My own teacher even limits his social contact outside of the studio so as to retain the professional teacher-student relationship.
From a teacher's standpoint, I would do some energy clearing work before I allowed myself to adjust a student I felt an attraction to. I don't think it's a big deal to recognize that some students are physically very attractive - it's finding myself attracted to them that is the potential problem. I can adjust a hot guy, but if I am thinking that I want to hop into the sack with him, HANDS OFF!!! [Note that this hasn't happened]
That being said, if I experienced this from your vantage point, I'm not sure how I would handle it. If it felt good, it would make it all the tougher! But regardless, it needs to be addressed in some way. Ditto Larry's advice. Also, it wouldn't be out of line if you felt more comfortable mentioning your discomfort to the studio owner. Or, you could choose to attend a different class. Good luck!