Well I assume that the translators consciously chose to call Erza a she and her completely ruining the bit where Master asks if it's a woman or a man...you wouldn't ask if someone is a man or a woman after already having chosen to call them she and her...especially when Erza has a clear male physique...so I would guess at first they are using gender neutral pronouns to refer to Erza.
Now I don't throw shade at the okama trope, it's amusing in its own rights.
Just wondering if I am correct in my assumption or mistaken...I would like to see some raws of this.
japanese doesn't have gendered second person pronouns. A more accurate translation would be either use the singular "they", or switch between "he" and "she"... is what I would say if I agreed with you. Master decided the name "Elza" is feminine, and people has been treating Elza like she's a woman, so it makes sense he would use feminine pronouns with her. The translation problem likely steams from the questions "are you a boy or a girl?" I imagine what Fran was actually asking was something like "Are you biologically male or female?" (which is less rude to ask in Japan than it is basically anywhere else in the world, for some reason).
Honestly, I am fine(ish) with this troupe when it's a gay man (which Elza is not). But this is horrible to do in this day and age if she's meant to be a trans woman. Not her body, but her personality and character in general. I hope author redeems themselves in the near future, but her inclusion in the story already points to the classic japanese bigotry