It is well known that Girlz Don't Exist on teh Intarweb. Thus anyone playing a MMORPG with a female avatar must obviously be faking it, and should be banned. The funny story of the week comes to you via Random Battle: A Chinese MMORPG company banned all accounts of female avatars, unless their owners could "prove" their sex with a webcam picture. Read Random Battles list of problems with that approach.
I always considered avatars to be sexless, because in most games they can't even touch each other, but would walk right through each other instead. Being incorporeal makes performing sexual acts pretty much impossible, you can only pretend the visuals for some clever screenshots. The only problem I have with men playing female toons is one of grammer: Do you refer to such a character as him or her? Or it?
Guys create female avatars for many different reasons. Most famous is the "staring at an ass in tights all day" argument of Francis from Scott Kurtz's PvPOnline comic. It has also been reported that males are more helpful and generous towards female avatars than to male avatars. (Same source mentions that statistically 1 out of 2 female toons are played my a man). And then there are simple roleplaying reasons. I had a female gnome warlock with pink hair in WoW, because I liked the dissonance between her cute looks and her "evil" profession. Why any of that should be bannable is a mystery to me.
Most probably the game makers were trying to "protect" the Chinese youth from accidental gay cybersex. Or they were lonely and tried to get their female customers to send them some photos. I don't think this is something that a western game company would ever try.