Bekka, give that girl a train! So glad to hear she has train play dates with a friend...I wanted a train my whole childhood, but no one took me seriously until I was about 11. I said something to my grandfather in, like the middle of July, and he took me to the Sears and bought me a Lionel electric train set. I played with it for hours, and it's one of my few surviving toys to pass on. Of course, I'll probably have a daughter who wants to dress up! and that's cool too.
As for the boy in dresses, my best friend's son's favorite outfit when he was 8 and 9 was a slinky, metallic, lurex skirt. This year (he's 10), someone brought a bag of hand me downs--mostly boy clothes--and his favorite was a woman's yellow polyester shell...which was fine with his Mom although she did suggest he wear something different to the grocery store. I think it helps that he's in a supportive community and no one bothers him when he dresses up at home. There are gays and lesbians in our community, and none of us are worried about him being homosexual. Either he is or he isn't...or maybe he's bisexual, but our general concensus is that what he wants to wear or play in has little to do with it. Also, no one's really attached to him being particular sexual orientation other than other than some concerns that life is just a little more complicated if you're gay, lesbian, bisexual or transgendered.
Glad to see that the responses here are supportive. I agree that making wanting a dress taboo for a boy is likely to create more difficulties than it solves.