Ma vie en rose (1997)
From Wikipedia: When the Fabre family move into their dream house with wonderful neighbors, everything seems perfect except for one thing: The youngest child Ludovic is transgender. The rest of the family humor him as best they can, rationalizing that he is only trying to find his identity and will be over it soon. Trouble begins when Ludovic befriends Jérôme, the son of his father's boss, and expresses a desire to marry him when he is finally "not a boy". The community turns against the Fabre family. Later, Mr. Fabre announces that he has a new job out of town and they have to move. At their new house, Ludovic is befriended by Christine "Chris" Delvigne, a girl who is also transgendered. Chris' mother invites Ludovic to Chris' dressup birthday party, which he attends in a musketeer outfit. Chris, unhappy in her princess outfit, asks Ludo to swap and has her friends force him to do so when he refuses. When Ludovic's mother sees him in the dress, she fears their troubles are beginning again and lashes out by hitting him until the other guests restrain her. She follows Ludovic to a billboard, where she is shocked to see him in the picture, running away with a living Barbie-like doll named Pam.
You can read the full summary here: http://en.wikipedia.org/wiki/Ma_vie_en_rose
Here's the movie trailer: http://www.youtube.com/watch?v=g0b0F8HAJgI