I believe that the Fool is male.
Fitz did see him unclothed, as he was found only with a sackcloth (adhered to his naked back) in the refuse chamber of the Pale Woman's dungeons.
Fitz carried him to where the stone dragons were sleeping, and as the Fool's body defrosted, Fitz cleaned him, removed the sackcloth, washed his body with leaves and clean grass, then built a pyre, and layed out his body on the pyre, straightening his arms and legs as much as he was able (still some rigor mortis in the Fool's body).
There would be NO WAY he could lay him on the pyre naked and not be able to tell the Fool's gender.
It was only after Fitz exchanged bodies to heal the Fool did Fitz realize how different the Fool was to humans, as much as humans were different from wolves.
Fitz never re-clothed the Fool. The Fool fell asleep on his mattress (the former pyre with Fitz's cloak spread on it), then Fitz set up the Elderling tent, placing the Elderling robe inside, then when the insects started to attack the Fool's body, carried the Fool inside the Elderling tent. Later, the Fool came back from the stream wet, wearing the Elderling robe.
The Fool is male. He was a consummate actor, he had several different facets of himself that he showed to different people, he never limited himself by gender and therefore was able to reveal all facets of himself both feminine and masculine, although there was little enough of the masculine. I believe that he was bisexual but unwilling to enter a physical relationship with someone unless he was in love with them and who was also willing (as per his argument with Fitz in Golden Fool). The Fool hints at a prior sexual relationship, but doesn't confirm it. He only states that Fitz thinks that the Fool has never known "intimacy of that sort" but then states "you think I was saving myself for you. Don't flatter yourself Fitz, I doubt you would have been worth the wait." This does not reveal that the Fool has definitely been intimate with another. It was an insult, that was all.
Either he loved someone in the past, prior to his arrival to Buckkeep, or the Fool had never been intimate with another.
The Pale Woman believed he was male, and she knew him as a child.
The Pale Woman believed she could provide Fitz with a child (which is what he desperately wanted, even though he would never have one of his own to raise).
Why if Fitz loved Molly (which was ridiculous and and adolescent obsession), why couldn't he have both the Fool and Molly? Would Molly be so shallow to resent the Fool? Why? Fitz didn't want a physical relationship to the Fool, it was disgusting to him. Why couldn't he have a close relationship with both? Molly for the physical relationship and the Fool for the emotional and intellectual relationship?