I've gone a round or two with this issue before. I've got two friends from my area that I play WoW with. Each has played a female character.
Friend 1 played as an Alliance female draenei mage. Whenever people approached him in the game as to whether or not he was a real girl or not, he lied. DOn't know why, he might have just liked the help. Eventually he had a 'boyfriend' that was about 13 or so (F1 being 18). He kept up the charade for quite some time. He even stooped as low as to 'cyber' his boyfriend with his character. I once asked him something along the lines of 'Whaa? Why would you do that?' to which he replied '... well I know what guys like ...' Eventually he felt guilty enough to tell the guy and his guild that the person they had all been so flirtatious around was actually a guy. If I remember the boy's reaction right, it was something like "... wat? Srysly? ... omg". Friend 1 deleted the female character and plays male characters now. I don't know if he still cybers anymore.
Friend 2 played his first character, a male blood elf paladin to 70 for about a year. He was very successful with that character and frequently raided with a high-end guild. In the downtime he played on his alts. He tried a few characters for a day or two then deleted them. The ones that he held onto were all female. He currently has three blood elf females (rogue, mage, deathknight) and one human female (warrior). Presently, his male character is retired and he plays female characters exclusively.
Then there's me. I have never played a female character nor do I ever intend to. I like to represent myself through my avatar in a way I can identify with. Friend 2 and I have gotten into a debate recently about playing female characters. He seems to think that I should play a female character and that it's weird that I don't. In return, I ask him to explain specifically why he plays a female character. He says that he doesn't mislead people as he's very open about saying he's a guy whenever some random player does a /assgrab in a crowded city. And although he once candidly said that "They're so hot I can fap all day to my characters!", he claims that he doesn't play them to just stare at their ass. He was never able to give me a solid answer and just meekly dismissed the conversation saying "Well, I just like playing my character, that's all." He has never made another male character.
So I don't understand the cross dressing demographic. Some are perverts (Friend 1) and some just like the look of them (Friend 2). I don't understand how people should feel that they need to justify their sexuality by forcing themselves to stare at a female character's backside all game. I sure don't stare at my male character's backside with man-lust. I understand that a character is a character, and I just choose to see mine as a representation of myself rather than a perky tool to drive around.