For those of us in the LGBT community, it's incredibly easy to feel very misrepresented in video games. I don't want this to be another one of those threads where people whine about being discriminated against, but I have a difficult time identifying with my in-game avatars when there is no option for transgender. I am what I am, and it's unfortunate that I struggle to find other outlets to express myself. I have always had a strong preference for RPGs due to the fact that I can always be something in virtual reality that I can never be in real life. I know that it's a challenging issue when there are many who are very uncomfortable with LGBT issues bleeding over into the gaming community, but it's 2012. We need to move past certain hurdles that prevent a large group of players from feeling connected to the rest of the community. As a transgender woman, I would definitely appreciate the ability to create a character in this game that would reflect who I am in real life.
There are several ways to successfully implement a feature like this without alienating other gamers. My first suggestion would be to consider making an Elf like race have no specific gender. If it's left ambiguous, it is much easier for transgender players to identify with these characters. Other options could include elemental type creatures, such as stone golems. It is a fair compromise for those of us who are just trying to find an easy outlet to connect with characters in a fantasy universe.