What a super little lad! I love the idea, and I suspect he is having great fun with his project. Personally, I would see no problem with the sign as it is to go inside the grotto (but then i swear like a trooper myself) On the other hand, what dad says, goes. I like notme's stone too, but instead of buying it, I would encourage him to find a stone he likes and paint it himself...
As for any problem with liking faries...what's wrong with that? My ten year old daughter is not into dollies much, loves skateboards, likes pink - but loves Ben Ten, Ninja turtles and most of her mates are boys...does that automatically make her a tomboy?
Gender stereotyping really should be a thing of the past, I think a lot of kids have very varied tastes nowadays, and so it should be. My son (now a hulking monster of 18) loved playing with his sister's kitchen, and her dollies...admittedly, he does have long curly hair now...might he have ruined his chances of being a "man's man"? Oh dear...