Haven't had any trouble with it. Got some of the best roleplaying I'd seen out of one of my players, who used it as his first real chance to play a character whom he knew was different from the player himself.
Needs to be handled on a case-by-case basis. Some groups, it's probably a bad idea, just as, from the DM perspective, I wouldn't throw a sex-related plot into every gaming group, or a religious-conflict plot, and so on. You find out what your group can maturely handle, and you go with that, and every once in awhile you push the envelope a bit to see if people have matured, and if not, you go back inside the comfort zone for awhile longer.
Teflon Billy had lousy experiences. I respect that. If I played in his game, I wouldn't insist on playing a woman just to tick him off -- just like I wouldn't insist on playing a paladin in a game where the DM has had oft-repeated paladin problems and has stated that he'd prefer not to deal with paladins. I've got a wide range of characters, both male and female, that I've been interested in playing, and I'm sure that I'd have a good time in one of his games under his rules.