Aristotle said:
Here is my issue I guess. If you refuse to let players play characters across gender lines, then where do you draw the line?
That's up to the individual DM.
If the DM wants to say "Only humans, since nobody ever plays elves as anything but arrogant humans with pointy ears", then - whether he's correct or not - that's the rule in his campaign. You have two choices - play a human, or don't play.
That may leave the DM with no players, but just as he can't force you to actually play in his game if you don't like his rules, you can't force him to run the game by rules he doesn't like.
If the DM wants to say "You can only play a straight white male", then, again, you have two choices.
The DM in question might be terrible. On the other hand, he might be brilliant at every aspect of DMing in the game he runs, as long as you're happy abiding by the restriction on character generation.
You have to decide as a player if you'd rather play a straight white male under this DM, or find another game.
The DM has to decide if he'd rather run a game with only people who are willing to play under those restrictions, or use different restrictions.
Supply and Demand.
-Hyp.