I don't see any harm in having more options. If I understand correctly this is only ever going to affect the user, other players won't even see it. If it makes people feel more comfortable and represented in the game, then I think that would be a good thing.

Regarding 'they' being confusing, it really isn't; there are occasions in normal conversation where you will use it, probably without thinking or noticing.
I inherited my FC and the application form at the time didn't ask about gender. I never changed the form, so we have several members who simply never told us. I used to say 'he' or 'she' according to the avatar, but I've stopped doing that. Guys playing female avatars seemed especially likely to find it odd/objectionable. So, rather than risk getting into deep conversations about why I thought someone was female/male, I now keep it neutral and say 'they'. So far, nobody has been confused.