It's not just Western propaganda; there are many Muslims who do believe they'll get 70 virgins in Paradise. I'm not saying they're the best and the brightest Muslims, but they're out there -- just as there are Christians who fervently believe in things like the Rapture. For instance, a Hamas activist reported that he told prospective suicide bombers, "If you become a martyr, God will give you 70 virgins, 70 wives and everlasting happiness."
See
this article in the Guardian, which also includes some surprising comments by
Al-Suyuti.
However, I don't doubt that this belief is so widely known in the West because Christians are titillated by it.