Mainly because it's part of the fetish. There's a reason why you find so many male-to-female TF games on here. Though, those usually focus on the MC, not on others.
As for a rewrite, it would take a lot more time than you think because they're written as being male, so you can't just change the pronouns and call it a day. Not to mention that males are aware that they're being transformed, unlike women. Honestly, I'd call anyone insane if they decided to retcon stuff like that this far in.
Depends on the character, but generally, yes. Lily has the ability to obfuscate their perception. As for losing out on characters, there's only one, and that's because their stories intertwine more than the others.