I was talking about this to a conservative acquaintance recently and she assured me that she'd recently seen a sexually geared drag show aimed at children. I didn't call her a liar (although I seriously doubted that could be true - I think it's more likely she heard it from a pal who decided that all drag is sexual), but I did express skepticism that this is a common occurrence, and pointed out that things like story hours and handing out cupcakes is never, ever sexual - which she did agree was correct.

I think your final paragraph is right on target. They don't want to normalize drag or tolerance for any marginalized group because it's important to them to maintain the gender binary and the social hierarchy.