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Well you have got the crux of the concept, you see although the woman's intentions are not malicious in any way while dressing the child in the clothing of opposite sex but at such a tender age a fragile mind of child should not be muddled with by carrying out such actions which may apparently look like a fun filled activity but for a child who is at the learning curve of his life, this may propel his mind to introspect about his true gender and sometimes unnecessary introspection coupled with young age associated curiosity may drive the child to become more experimental about his sexuality which may later take shape of a gender identity disorder.
So it is best to avoid such a practice, after all there are so many other ways to have fun with the child without risk of such repercussions.
I hope this helps.
Wish you all the best.