Seems like you have your gaydar up.
That jerk is begging for a punch to the face.
Remember the Johnny Cash song “Boy named Sue” about a father who named his son Sue to make him tough. He knew that he would be fighting and scrapping all his life because of his name. These parents seem to be doing something similar. They are not giving him a girl's name, just dressing him like a girl. On some level they have to know that this kids life will be full of conflicts but they will get their self-righteous jollies just judging people and feeling so superior to them. Their emotional poison is being passed on to him.