The majority of drag queens identify as men and are men who enjoy dressing as a women or expressing themselves artistically through clothes and makeup.
They call themselves 'she' in the character but not that many actually identify as women.
If a child asks if it's a man or a woman you can ask the child what they think and if they say woman because they're wearing a dress/sequins/makeup etc then you can say that men can also wear those things (the idea here is that your child is suddenly aware that sparkles, makeup, feathers etc aren't exclusively reserved for just 'girls'). You can also say that they are a man and go through the above steps. You can also tell your child to ask the performer themselves who will probably have a child friendly response up their sleeves.
Personally I adore drag but I don't think the full drag experience works for youngsters. A lot of it is Blue. But the amazing costumes, makeup, illusions, quick change, hair styling etc is wonderful to look at and great for breaking the mould that it only belongs to women.
This is exactly how I think/feel.
Theres no room for anything sexual rude or 'blue' around children. I think we can all agree on that. But a man with make up on reading a child appropriate story, using child appropriate language, no problem for me.
I'd feel the same if it were a woman wearing make up. The clothes and the make up dont determine who that person is for me.
If they are good with children and are entertaining in a child appropriate way I couldn't care less what they wore.