I have two boys, and the youngest went through a princess, barbie phase when he was 4 or so. We didn't buy him any dresses, but he found things to make do with - a bathrobe of mine, for example. We didn't discourage him or encourage him, although we did buy him a Barbie doll or 2. He even took the Barbie to preschool for show and tell a few times. Negative peer pressure kicked in by kindergarten, and he can't believe it now when he sees pictures of himself dressed up. It did no harm, but I believe it would have been harmful to not allow him that expression that he seemed to need for whatever reason.
Grits
2010 Trek 5.2 Madone WSD, SI Diva Gel Flow
2002 Terry Classic, Terry Liberator