Square-Enix addressed this on the FFXI twitter on Feb 17th concluding:

Quote Originally Posted by FFXI_EN @ Twitter.com/FFXI_EN
We’d like to introduce a few ideas that we dismissed. Sadly, items that change race/gender are not possible due to equipment issues. #FFXI
It's a shame since it's something I'd be interested in also, maybe the development team may be able to give some more details on how it isn't possible, even if requirements such as RSE equipment had to be dropped/traded to an NPC for conversion before the race change?