Advice about co-worker's dresscode

Hi. I'm Ryan. I have a question about one of my employees. We have a casual dress code in our office here. The men wear business casual clothing such as khaki pants, polo shirts, etc. and the women wear casual tops, slacks, and skirts. The usual. I've been a manager for 6 years and this is the first time I've run into this situation I'm about to describe:

We just recently hired a male employee by the name of Nathan. Nathan's private life is none of my business nor any of his coworkers' neither. Just like every employee, leave your private life at home right? Anyway, Nathan is somewhat effeminate for a male. He wears his hair long like a female and talks in a higher feminine sounding voice. Some employees have even mistaken Nathan for a female. Just recently, Nathan was talking to Sarah, a woman in our department, and I overheard him comment on how much he liked her suit she was wearing. It was a gray skirt suit. It resembled the one in this link:

https://s-media-cache-ak0.pinimg.com/736x/70/69/2f/70692f067913f35c97d01440a009f044.jpg

I also heard him ask her where she got it. Our dress code doesn't say skirts aren't allowed for women in the office, they just need to be appropriate length. No brainer right? Anyway, when he was talking to Sarah, that was about 2 weeks ago. Friday, Nathan had the day off, so I found it odd when he showed up in my office. My office is located in a spot where you don't have to walk through the rest of the building to get to it. Anyway, he showed up wearing the same suit Sarah did...skirt included! He didn't appear offensive to me in any way, but I am worried he may offend someone else in the office. It does follow dress code so technically, he's not breaking rules! The purpose for the visit was to ask if I would ok the suit, so he could wear it in front of everyone in the office. I told him I'd get back to him about it asap, but I don't know what to do. Should I allow him to? How would you handle this?