Madame Fatal was likely inspired by two popular movies, THE UNHOLY THREE (where Lon Chaney Sr was a criminal disguising himself as a woman) and even more by DEVIL DOLL with Lionel Barrymore in drag as an old woman while he avenged himself with murderous shrunken people under his command. DEVIL DOLL was almost certainy the source for the successful hero Doll Man.
The slightly scandalous aspect of a man in disguise as a woman was fairly shocking back then. I'd guess that it was the main thrust of the Madam Fatal strip from the start, and the creators had Barrymore in mind.