My three year old says she is a puppy and my seven year old is a velociraptor.
At 8 my daughter hated girls because they were prissy. She is a magnificent mom of 35 who has more than reconciled with her femininity.
Children must be molded into human beings. They are not born understanding very much. They most especially do not understand anything about their sexuality, particularly at age 3.
These parents seem unfazed with the likelihood that their child will become seriously mentally and emotionally crippled because they could not celebrate his boyhood.