A video game avatar is not clothing. It is not apparel that the person is personally wearing.
In a make believe, fantasy world…it is hard for me to hold a person morally culpable for another person thinking that the sex of their avatar is equal to their actual sex.
If the actions taken by my avatar (such as the types of cloths worn) are personally imputable as sins that I have committed, then I have far worse things to worry about seeing as how I play a gnome mage on World of Warcraft with 18,546 honorable kills…
It is a fantasy world. Now, if the world becomes an occasion for lust, I could argue that intentionally encouraging it would be sin. But just playing a character of the opposite sex? Every gamer knows that most “girls” in virtual worlds are actually guys, so unless you find someone radically new and naive to the world of gaming, nobody is being “deceived” in any real sense.
And game worlds are that, game worlds. If you are playing “Monopoly” with your family and you own “Boardwalk” and your daughter lands on it and pays you “rent”, do you report that to the IRS as income? Of course not, it’s a game. If you “kill” or “steal” in a game (and yes, I have done both in a game, in accord with the Rules of the Game *), it isn’t legally cognizable as Murder or Larceny in a court of law, so I would argue that it doesn’t constitute those sins either. Now, cheating in the game could arguably be treated the same way as cheating at sports, but just taking advantage of the fact that the game rules permit you to kill another character and take his weapons and gold? It’s the same thing morally as playing a board game that permits you, on your turn, to attempt a “robbery” by selecting a player and rolling two dice, and if you get above 10, you get half their points. It’s part of the game rules and you implicitly agree to them when you agree to play the game.
And it isn’t crossdressing any more than being a guy writing a novel with a female character in it is, or him reading the novel and imagining what it would be like to be said female character.
*Years ago, I was playing an online RPG and I had a character that was part of an in-world, player organized Empire with access to in-game natural resources and manufacturing facilities. My character went AWOL, embezzling expensive Imperial armaments (that cost in-game resources expended by the Empire) that he had access to and could carry with him. Everyone playing understood that actions like that were part of the fun of the game.