AFAIK he was, but DG still had the final veto power. Look, DAO made it very clear. The Qun does not tolerate transgenderism. At least it didn't in DAO, and that line was perfectly consistant with how else the Qun was presented (an inflexible, alien, and extremely conservative philosophy). Tbis was changed in DAI (at least w/r/t transgenderism) which makes this an unwelcome retcon. As Ieldra has already said, I don't have an issue with transgenderism per se in the game, and I think Krem protrays it brilliantly. I DO object to using the Qun as a vessel for discussing it especially when it changes how the Qun is regarded at (or at least near) it's very core.
I do not believe the Qun is friendly to the transgenderism because they would still assign roles based upon merit and not based upon personal feelings. It is a different perception of gender, in my opinion, and not a matter of transgenderism.
The Qun and fallibilism
To put it different and a bit lengthy; the Qun believes their philosophy to be infallible and so there must be no contradictions to be found that renders it fallible. The different perception would likely come about because of this need for the Qun to remain infallible.
If the Qun states that someone of the female sex cannot be capable of combative competence on par with that of a soldier but evidence to the contrary is found because someone of the female gender displays combative competence on par with that of a warrior then that presents a contradiction.
The solution to the contradiction would be to decide that since the Qun states that someone of the female gender cannot be of combative competence and that only someone of the male gender can display such a combative competence then it follows that this person must be someone of the male gender.
Furthermore, they could explain it as being a misinterpretation of the Qun philosophy since thereby the blame would be laid at the feet of someone fallible and not at the feet of something believed to be infallible.
Krem would likely have a combative role assigned to him within the Qun but not because he desired such a role but because he claims to be of the male gender and can provide evidence to his claim by the way of demonstrating his combative competence. Had he claimed to be of the female gender or lacked the necessary skill to provide evidence to his claim then it he would likely not be assigned the role he desired.
Sten and his dialogue
Sten: "I don't understand. You look like a woman."
(...)
Sten: "You are a Grey Warden so it follows that you can't be a woman."
Warden: "That dosen't make any sense, Sten."
Sten: "So you understand my confusion, then. Women are priests, artisans, shopkeepers or farmers. They don't fight"
Warden: That's not a universal truth. Some women fight."
Sten: "Why would women ever wish to be men? That makes no sense."
Note that Sten percieves this to be a wish on the women's behalf to be men; it is not a denial of skill, it is a denial of gender. Sten would have had the oppertunity to encounter combat with opponents who are female but he percieves them as male because they fight therefore they are male.
On a related note, I do not believe the Arishok questions Hawke on their gender despite their first encounter being after Hawke has disposed of Tal-Vashoth.
One interpretation could be that it is because he assumes it to be another bizarrity of Kirkwall but another interpretation could be that the Arishok percieved Hawke as male due to their participation in a combative venture. He acknowledges, I believe, them as having skill for facing Tal-Vashoth. When the Arishok potentially challenges Hawke or is challenged to single combat during the finale of the second arc regardless of their gender, he makes no remark towards their gender.
Interestingly enough, I am not even certain the Arishok ever refers to Hawke with gender pronouns but perhaps someone can confirm or deny this for me before I rifle through the cutscene videos to be sure?
Warden: "You think they can't be women, because women don't fight?"
Sten: "Exactly."
Warden: "I'm a woman and I'm fighting."
Sten: "One of those things can't be true."
This quote is interesting to me because Sten would know the Warden to have displayed combative competence so I do not believe it likely that this would be the thing he considers to be false since he'd know it to have been proven true and so saying otherwise would be denying the obvious. It follows then that the thing he considers to be false is what gender the Warden claims to be.
Sten: A person is born: qunari, or human, or elven, or dwarf. He dosen't choose that. The size of his hand, whether he is clever or foolish, the land he comes from, the color of his hair; These are beyond his control. We do not choose, we simply are"
Note that Sten refers to things such as both physically and psychological traits, nationality and race. He does not mention gender because gender is assigned based upon role and therefore, while gender is not something a person can choose for themselves, it is not something that cannot change.
Warden: "But a person can choose what to do."
Sten: "Can they? We'll see"
Throughout the quoted dialogue, the Warden is never provided the dialogue option to claim to be male so we are never provided with the oppertunity to see how Sten would respond to such a response.
Sten does not have an issue with the Warden being a woman nor does he have an issue with them being a warrior. Sten's issue lies in the Warden claiming to be both; a female warrior because the two are contradictory to each other hence this line; "One of those things can't be true."
If the Warden had denied the former of being a woman, Sten would have been provided a solution because then there'd be no contradiction as he percieves it.
I'll most likely add a TL:DR because I should have made this post into two separate post but as I cannot copy and paste from the forums and I do not feel like copying manually, it'll likely stay one post.
A few more walls of text and I have built myself a fort of words!