I'm going to clear this up once and for all.
In OoT, Sheik was stated to be a guy (I don't remember where), and examining his character model made it very clear, as well.
Remember that the Sheik in Brawl is NOT the same Sheik in Melee, which was the one in OoT. The Zelda in Twilight Princess is not the same Zelda in OoT: the former is a decendant of the latter. Furthermore, Sakurai said that Sheik's new character model was designed for TP, but we all know that Sheik doesn't appear in TP, so they obviously must have removed the character during development (likely to avoid making TP too similar to OoT). However, we now know that they must have intended for Sheik to appear in TP as a female. Hence, the Brawl / Twilight Princess Sheik is female and the Melee / OoT Sheik is male.
So, that leaves the question of what Sheik's true gender is. There are a number of valid arguments for this.
1. "Sheik's only non-cameo appearance (since everybody in Smash games except Master Hand and his minions are technically cameos) was in OoT, wherein he was a male. So, until he appears in another Zelda game with a changed gender, he's still a male."
2. "Sheik WAS a male, but Nintendo changed their minds, and his gender, during TP's development. Just because the character was removed doesn't mean their decisions about her don't stand. So, Sheik WAS a male, but is now a female."
3. "TP Sheik shouldn't count for the character's gender status because TP Sheik was removed during development. If it wasn't for Sakurai we would probably never have known Sheik was ever going to be in TP. So, Sheik is a male because the OoT Sheik is male."
4. "Sheik is a magically created alter ego anyway. Zelda is the original form, and it's still her mind even if the body changes, so it's her gender that should matter, not Sheik's. Thus, Sheik is a female."
Personally, I stand by argument #2. And let's face it, it removes a lot of confusion to simply have Sheik be female and leave it alone.
