How prevalent is cross-dressing in the gay male community?
Before I answer that I have an anecdote. Some years ago I read an interview with an actor on a soap opera who'd just been told that his character was going to turn out to be gay. He told the interviewer, "I guess I'll have to go out and buy some dresses." I thought: Why? The character was gay and not a transvestite [or cross-dresser].
There has always been a frankly ridiculous link in the public's mind between homosexuality and transvestism. The fact is that the vast majority of gay men are happy being men and haven't the least interest in dressing up as women. Because flamboyant drag queens [gay transvestites] have always been a hard-to-ignore part of gay culture, people have mistakenly believed that more gay men are cross-dressers than actually are. In reality, most male transvestites are actually heterosexual [or at least identify as such]; they lead straight lives but enjoy dressing up as women, touching and wearing female underwear, and the like -- it's a fetish.
So to answer your question: cross-dressing is not very prevalent at all in the gay male community, although due to popular culture and coverage in some of the sillier gay magazines it may sometimes seem that way. With the emergence of the bear community, I'd have to say that drag is even seeming a little passe these days.