You caught your son wearing nail polish?

Answer 1

Let Him   I am a young male and my babysitter paints my toenails pink very often. it is ok

Answer 2

Just because he paints his toes and wears your clothes does not mean he is g*y. He is most likely going through a stage in his life where he is unsure of who he really is. He may be having fantasies about forced feminization. He may actually want you to catch him and force him to dress up. Possibly in front of others as well. He may want to be humiliated like that. He may also be considering what it would be like to be a woman in real life full time.

He could also have a mistress or dominant girlfriend that requires him to do these things.

I would suggest doing some research on forced feminization and petticoating then talking to him in an understanding fashion. You do not want to alienate him but letting him know you know will make your bond together  stronger.