I'm all about steering my children away from gender stereotypes but this, in my opinion is taking it too far. I keep Finn's hair on the long-ish side for a boy, I have let him apply lip gloss to his lips, and when he stares lovingly at himself in the mirror I choose to call him "cute" rather than "handsome". Heck, I even let him walk our streets with a little pink stroller. But if he comes to me as a Kindergartner asking if he can wear a dress to school...the answer will be a very carefully constructed and sensitive "No".
Kids can be cruel! Pops parents are paving the way for a lifetime of teasing. We live in a society where gender roles happen to be strictly defined, perhaps a bit too much, however that is the way it is. To each there own, I guess, but this is a child and he has no voice in the matter.