I find I'm really taking issue with this thread. Not with your original question, Alexis, but with the tenet of the replies.
There's the assumption that, when a 2-year old plays with "girls" stuff, it could mean he's gay. With the "evidence" of some gay men saying they played with girls' stuff as kids. I have a couple of real problems there:
1: how about gay men who played with footballs but also felt different? how about straight men who played with dolls ~ oops, we don't hear from them.
2: more importantly, why do we connect dolls and dressup with girls? isn't one of the most important things that feminism has done for us, showing us that women can play soccer and men can be caregivers? But then, as soon as we see a boy in a dress, the insinuations about gayness come up, and with them the implicit assumptions about gay men being "less male" and dressup in general being less appropriate for males.
Don't get me wrong, I have nothing against homosexuality. Actually, the opposite, though I'm in a heterosexual relationship myself. I just find it very problematic that child's play is immediately interpreted in sexual terms.
My daughter is 3, and only now she's starting to develop ideas about gender roles. And they're not very traditional at all, though it's hard to show that females don't have to be caregivers to a child who views the world in terms of mamas and babies

. I think we're waaayyy off if we attribute such distinctions to a 2-year old in a dress.
Isn't it more likely that he just likes all clothes, including dresses? And including sports jerseys with trains on them? I know, and have read many times here, that many mamas secretly want to have a girl to play dressup with. Why wouldn't a 2-year old boy want to play dressup?
And Alexis, why do you think he's not appreciating his boyness if he plays princess and fairy ball games? Do you believe that a "real" boy just doesn't do that? If he were a girl, would you have the same feelings? He's only 2, what makes you believe he won't outgrow it? I sure hope he won't turn out to be gay, he'd make an excellent partner for my dd

if he stays that sensitive ! I understand you want to open up his interest, but I bet he'll do that all by himself when he's ready.
Of course I can't speak for mamas of sons, 'cause I only have a daughter, but I'm pretty sure I would let him go out in a dress if he wanted to. My dd has often been mistaken for a boy (we've even elicited comments like "wow, they even put boys in pink dresses nowadays" :LOL). What's the problem with it? What other people think? The messages he'll get? The worst that will happen is that he learns that most males in our society don't wear dresses ~ and isn't that the message you wanted to get to him, anyway?
sorry if I sound terse. I don't mean to. It just really really really ticks me off to see how insiduously homophobia and gender roles can make an appearance, even in such an innocent picture. The only way for children to find themselves is by letting them be themselves, whatever that is.

and ps have you ever thought that you are probably the reason for his "sissiness"? After all, you are his main female role model. Maybe he just loves femaleness because he loves you so much!!!
(edited to shorten. Imagine how bad this post was before .....

: )