The racial fluff in PHB3 covers this pretty well, I think. Some decide to be male, some decide to be female, and then they shape their forms accordingly. For all we know, they emulate ... pretty darn faithfully, down to the hoo-hoo's, and ha-ha's.
They wouldn't need to cover up, I suppose, just as they don't need to pick male or female. But if they're acting male or female, clothing usually goes with the territory.
Also, art-wise, it looks cooler this way.
-O