A Female is a being that isn't interested in other Females. This poses a problem for Seduction attempts, which target random Commanders in the province; if the Seducer is female, Seduction attempts on a female target will result in a heinous Assassination attempt, as one party or the other decides to prevent this from going any further. This isn't the Female icon, by the way; whether or not a unit is female doesn't appear on the character sheet, though most nations have gendered names.

Good question! The Heart Companion of Middle and Late Arcoscephale is canonically homosexual. However, if he were labeled as female to make it so he weren't into females, that would mean he wouldn't be into other Heart Companions; which would be a problem, since the lore says that they are specifically homosexual for each other.

The Cat Charm makes units female, at least for the purpose of Seduction; granted, the only non-female seducer is the Troubadour of Marignon (middle and late), but still.

Likewise, the Bear Claw Talisman was meant to remove the female trait in Dominions 5, but didn't work. Does it work now? I don't know.