I don't think she's done him any harm. Now he's 5 and old enough to tell everyone he's a boy, she's not trying to keep it a secret.
I think people are very sensitive over gender.
My mother told me my 2yo DD would grow up gender confused because she wore her 4yo brothers hand-down PJs. Funnily enough, she's very aware she's a girl (even though DS2 told her she was born a boy, but we chopped her willy off after she was born
)
My older sisters tried to be gender neutral with thier DC ( not to an extreme extent, all my DN have names which clearly state which gender they are), and took great delight in giving my DS fairly wings for christmas, etc. I couldn't care less if he wore fairy wings, but DS1 was only interested in brumming cars around the floor.
I think if a girl was dressed in dungarees every day, and given a short haircut it wouldn''t make the papers.