Lori, I can give you an analogy: when children ask about the birds and the bees, we only tell them as much as they ask and are ready to hear. The rest comes later.
You don't need to tell your sister the entire history now. You can simply tell her that you are transgender, this is a very real condition, and you do not appreciate the pedophile comments. You can talk to her about all your current concerns with this. You can prepare yourself with resources. Gather some links to informative, non-discussion sites to begin with and ask her if you can email them to her.
Be sure and read the link I posted in #38. Even though this is geared for telling SOs, some of the advice is applicable to other family members.
Be prepared to answer any of her questions, but I'm guessing they will focus on your current presentation and lifestyle more than the past. If she asks how old you were when it started, just tell her the age. She may not even think to ask where you got your clothes, but if she does, you should tell her that you borrowed hers. And then it may not occur to her to ask which items specifically, but if she does you can use your discretion as to whether or not telling her you borrowed her leotards is sufficient. This was a long time ago and you no longer borrow her clothes, nor will you in the future, so there is no point foregoing current concerns just to dwell on distant memories.
It's not about the panties you borrowed as a child. It's about who you are now, how you live, your future decisions, how these will affect you and your family members, etc.
Edit - Just curious ... why did you feel the need to distance yourself from your sister when you began to question your gender identity?
