Certainly in the not-to-distant past, boys who played with dolls were commonly assumed to be either sexually confused at best, or outright homosexual at worst. Homosexuality constituted a moral violation entailing severe social and legal sanctions, and often psychiatric intervention. According to a BBC News article, "...in the 1950s and 1960s, behavioral therapy was used to try to "cure" gays. Men convicted of homosexual acts were routinely given electric shock treatment, hallucinogenic drugs, and subjected to brainwashing techniques." (http://goo.gl/EjYTRL) Homosexuality constituted a cultural taboo, and the simple act of boys playing with dolls was repulsive to many.
However, normative definitions can be dynamic. They may change, but usually not without serious social conflict. Certainly, American attitudes towards all kinds of sexual expression have become more liberal in recent decades (see, e.g., http://goo.gl/6SnhdE). Despite continuing controversy about the legal status of gay marriage, the fact of appearing effeminate, much less being homosexual, no longer suggests a serious moral breach to many Americans, particularly millennials (http://goo.gl/FoSAZ7).
Will Target's decision to change how toys are displayed influence normative behavior? Perhaps--but it may be a case of "too little, too late." While parents who allowed sons to bend gender in the past may have been negatively sanctioned, today it's become another matter: parents who do NOT allow their boys to play with girl toys are out-of-line. Increasingly, the evolving culture suggests that upholding traditional gender definitions is indicative of sexism, perhaps now justifying moral crusades against it.