Is it a bit over-the-top to have a first grader setting gender construction norms? Sure. But what if he is transgender?
Now, from personal experience, I can tell you that those sort of things kinda grow old for some. I used to dress up in dresses and skirts(without my parents seeing, of course), and pretend I was a girl. But I eventually grew out of that. So this boy may not actually be transgender, but likes dressing like a girl and is trying to fit a preconceived notion of what it means.
In this case, I think it should relate back to sex, not gender. I don't mind a man in a dress walking up to a urinal by me. Inherently, him wearing a dress means nothing. As a first grader, there is no need to force him or guide him into a decision about his gender. He may change and then become confused later in life. Just let him be who he wants to be at any given time. Guide him, but don't force him. God never forces us to do things, so why would we force someone else to do something?