It should totally be allowed. Ultimately the gender really doesn’t matter if you can pull everything off (photo shoots et. al). This applies in many aspects of life – we’re only just barely beginning to break out of a highly gender biased culture and there’s a long way to go. Acknowledging that some people are more comfortable as one gender or the other is, in my opinion, a good step.
Having said all that, I think that the show is using it to increase their “we’re so progressive” brand. It started with their so-called aggressive stance on “too skinny” models (and look at some of the girls in this contest now – they’re not following through), then “plus size” models and now they’re trying to score points with the LGBT crowd with this. The side effect is good, yes, but I question if their motives are truly altruistic.
This show is the dark, lovely, secret pleasure my wife and I have. It hurt to watch at first but once my cherry was broken I really got into it.