A boy and his dress

I just finished reading this article on gender confusion in small children (from a link at daddytypes).

Wow. What to do? I'm torn between the idea that a young child should be supported emotionally, and the idea that as parents part of our job is to teach our children about the culture in which we live. What's the happy medium between self-esteem and social ostracism?

My son has expressed the desire to wear pretty clothes, including his favorite red flowery dress. However he doesn't say he wants to be a girl, and most of his other chosen activities are typically masculine (as defined in our culture) such as playing with tools, toy cars, going to Home Depot with Anthropapa, and trying to sneak in gun play whenever he thinks I'm not looking.

We decided to compromise on the dress-wearing thing. I told him it was for "dress-up" time only, when he and his sister put on play clothes, fairy/butterfly wings, funny hats, etc. And the other boundary is that we only play dress-up inside the house. I feel like I'm protecting him from negative social judgments, while giving him a safe boundary in which to express that part of himself.

However, I have also made a point to tell him gently that "where we live, usually only girls wear dresses." (We did know a man back in California who would regularly wear sarongs, but I don't think SillyBilly remembers that!)

I feel like I'm helping him learn what is expected in his cultural milieu. But am I making him feel bad about himself at the same time? The NY Times article said "Studies suggest that most boys with gender variance early in childhood grow up to be gay". I've felt strongly from before his birth that I will support and love him in whatever paths he takes -- though we joke that we won't support him being a pimp, killer-for-hire, or right-wing Republican : ) -- but am I subtly telling him that wanting to be more feminine is wrong?