Persona 2 had a gay romance the player could do, and that was from 1999. The first time I ever saw anything queer in a game was Star Ocean 2 though. You choose between a female or male character at the start, but the two romance options are available to either character, meaning both player characters are bi. That's also a Japanese game from 1999.

The Phantasmagoria games have explicitly queer characters and full on intercourse at several points.

I also like the option of choosing body types independent of gender binary. Some recent games have even allowed you to pitch the player character's voice up or down, which is super neat.