I think there are several things happening here.
Firstly, I think that we all unanimously agree that pointing, laughing and jeering openly is wrong and should not have happened.
Since it did happen, this is where we are divided.
There are people who feel that the OP "brought it on herself" by allowing (encouraging, some think) her son to wear an Elsa dress on a school run, and there are people who think that the OP should continue to encourage/allow her son to do this because the jeerers are the one with the issues.
I understand both those viewpoints. However, I'm not entirely sure I'm completely in agreement with either of them.
My 'issue', such as it is, comes form the fact that I don't like princess dresses. It is not that 'the worst thing you can be is a girl' at all. Dress up as a nurse, play at being a dad and push a pram (or baby wear to be really right on 
), by all means. But I don't see where 'feminism' translated into 'all the frivolous, frills and flounces, pouts and puckers, should be freely available to BOTH sexes.'
Isn't it high time we started encouraging our boys AND our girls to be something other than Disney princesses? 
The frocks do revolt me, and I know that's a strong statement but it is one that is honest. I dislike seeing them on little girls but often 'gender reversal' can be even more unpleasant (for want of a better word) when you see something that isn't usual you question it more.
I feel similarly when I watch Dance Moms guilty pleasure and the girls wear bright red lipstick and heavy makeup. I understand it as under the stage they just look like pretty girls. But under the raw light of backstage, it looks like an over the top and elaborate pantomime. I hate seeing children like that. I just hate messages that indicate/suggest that children are to be valued on their looks, and no matter what superpowers Elsa had, she is a princess and wears a dress accordingly.
Now when children are playing, that isn't a problem. When children are undertaking a day to day activity, it is more so: I suppose, to cite my earlier example of Dance Moms 
that makeup looks fine on stage. Off stage it would look garish and hideous, frankly!
Now my second 'issue', for want of a better word, is that it can be dangerous having parents who titter indulgently and say 'where's the harm'. It is the child, in this case children - I doubt very much that this little boys older brother was thrilled at being questioned about his brothers outfit of choice, although huge kudos to him for how stoically and loyally he dealt with it - but he should not have to.
My parents were lovely but a sentence I used to dread was "no one here knows you," that translated to - 'so you can be naked' - I felt uncomfortable being naked from a very early age and don't know why: just did. But because I was a little girl it was acceptable for me to run round unclothed on the beach. As I got older and an all over tan was the fashion I still remember feeling very uncomfortable about being encouraged to remove the top half of my bathing suit. I was as flat as an ironing board but still 'felt' on some level I should be keeping that part of me covered and didn't like being encouraged to do so.
Obviously, this little boy didn't notice - and I remind people again that I don't condone rudeness, ever - but his brother did and he will.
My firm recommendation is to keep princess stuff for dressing up boxes. If however, he wants to push a pram to school I'd be right behind you in the 'dads look after babies too!' camp :)