this may shock you but gender identity and sexual preferences are completely separate
Exactly. And he has assessed himself as heterosexual male in gender identity and orientation from the start. If he were becoming attracted to a male classmate things would get a bit more blurry, but his classmates are all female, attractive and he's obviously having the hots for them, so he still prefers women. And since he's still claiming to be a man as his gender identity, he's male. His confusion about his arousal in a female body, in the end, is not determinant as being a purely biological and instinctual reaction. The weird thing would be if he WEREN'T feeling arousal when he should (as in, stimulating erogenous zones or from sexual preferences), gal body or not.
In the end, if we were tu put a label on his current gender situation, he's a transgender heterosexual male. And since he's adamant to still identify as male until he gets his biological male gender back, he's still a guy until he says otherwise.
However, this is reading too much on a ecchi TS comedy, so I don't think we're getting that far on serious gender issues.