The following video is a great depiction of transgender children (click the link below the picture).
There is a difference between gender identity and sexual orientation. For example, parents who have a boy identifying as a girl thought that they may have a gay son.
It's important to remember that gender identity is a spectrum just like sexual orientation, but it is a different spectrum. There's a difference between transgender and gender non-conforming. This spectrum is about masculinity and femininity.
You can be born a boy, identify as a girl, and still be either straight or LGB. You could be a girl who is more masculine, but is still straight. Or, you could be a masculine, gay boy or a feminine, lesbian girl or a transgender, masculine, bisexual man. Or anything inbetween. Our identities are fluid, complicated, and most of all, normal. We as human beings love to put things into boxes, and anything outside of these boxes scares us. It's important to remember not to box-up identity. It's a disservice to your friends, family, and your children. (see the image I made below)