I just answered "other" because my reasons vary considerably, I don't always play female characters or anything like that. Over the years it's varied from questions of graphics, and not always for reasons of sex appeal, but because in some games I'd think the male characters always looked like dorks. In other cases certain characters are female only, like for example if you want to play as a mage in say "Diablo 2" or "Sacred 2" you pretty much have to select a female character, you can't be a dude and focus on roasting enemies with fire and lightning and such. Then again there are cases where it might be the eye candy, or for something differant, like for example I've already played "Persona 3" but on my PSP version I'm playing the game with a girl because it changes things around and adds differant social links.
I've played both genders in PnP RPG games as well, to be honest I don't think playing a female character is any worse than writing about one or whatever. I think some people simply analyze it too much.
Over a period of years I've come to the conclusion that people who constantly question this are insecure in their own sexuality for whatever reason. Unless a guy is say hiding behind a mask or "blind" and trying to convince people he's a girl IRL in an MMORPG or whatever there doesn't seem to be an issue. Pretty much everyone I've met who has a female character or avatar is generally self confident enough where they don't think much about it, and are actually (like me) more confused about what other people think the big deal is.
I'll also say flat out that girls DO play male characters and with some frequency, and yet people tend to overlook this or pretend it doesn't exist. Probably because it's mostly guys who wonder about it due to their own insecurities. One of the better shamans in my guild in WoW for example was a lady playing a male Draenai with those "sweet muscles", has since retired for a while though.