I'm not completely sure if this was what the OP was talking about (or if it is even on topic).
I was under the impression that (traditional) onna kengeki (女剣劇, lit. women sword theater) was a form of chambara drama (a form of martial arts drama) and taishu engeki (popular theater known for male cross-dressing) derived from shinkokugeki (lit. new national theater), known for realistic sword fighting and sword play. Usually it consisted of a three-person female group and was popularlized in the 1930s.
As a whole, taishu engeki plays were more about themes of male and duty some times with (sometimes) explicit references in dialogue and (enka) song lyrics (about being a macho man). It usually played itself off as something grander, and/or more popular that it really was. Onna kengeki has little to do with taishu engeki in recent times, but it's still around.
In onna kengeki, women either dressed up (in male wigs and kimonos, a general word for clothes, not exclusive to women) and took on male roles (wielding swords) or took on female roles (wielding swords), fight other male characters (usually played by women).
I can't say if there was a transition to erotic appeal that the OP references, but the role of a cross-dressed character was usually that of a comic role.
Take a look at this article except (see the page marked 134, page 340 on the scanned document) for a bit more background.
As a supplement to jpatokal's answer...
The 桃色女剣劇団 (lit. Peach-colored Women Sword Theater Group), is a club circle from Kyoto University of Art and Design.
The なるせ女剣劇団, Naruse Women Sword Theater Group, is a women-only street performing group (named after it's founder and first chairwoman Kyoko Naruse) that started out in 1993 from the above mentioned circle, when the university was a junior college in 1991. Here's a brief profile of their group. The founder of the group are Kyouko Naruse and Kachou Judai (now the current leader/(second generation) chairwoman of the group). Typically, they do street (song and dance) performances and short plays.