My girlfriend finds my physical touch that of a friend and not a lover

We've been in a long distant relationship since the past 4 months but we've have been friends since the past 10 years (school time). My girlfriend says that she doesn't feel being hugged/touched by a lover when I do so. She says she feels like rather she's being hugged by her mother/father/brother/close friend. I was the one who proposed her and she was a bit reluctant in the beginning as she said it was hard for her to treat a friend as a boyfriend/lover (although she had been in a relationship earlier with a guy who was her friend because she found him attractive and it was love at first sight for her).
She says she slowly started loving me by convincing herself that I am the man of her dreams and that she has to marry me because she feels like I care about him the most out of all the guys she had in her life earlier. Now she says that she loves me a lot emotionally but not physically even though we did get physical. She says she cant live without me even though she doesn't get physically attracted to me (even though I am good looking with little baldness on the forehead). She even says that we both are meant for each other as we have like mentality, thought process, likeness for things, libidinous nature.
We both are very faithful towards each other and when coming to my part I am totally in love with her.
Is it normal the way she reacts? Does she finds me not so physically attractive due to the reason that she had all these years considered me a close friend and she is finding it hard to get so intimate with a guy who earlier was her very close friend and now her boyfriend (although I always considered a friend and a not a very close friend but she does says the truth as she has shared her all very deep secrets about her past life and relationships which she claims she hasn't done ever with anybody else). She is a very straight forward and simple person (she doesn't lie at all and that I can easily make out). We plan of getting married as she says that she has found the man of her dreams (has she really found?? I doubt as she still doesn't find me physically attractive, and does she wanna marry me because she has many failed relationships in past and now wanna settle with me because I am caring and protective and loving for her.

Please help me I am really really very confused in which way my relationship is going.