^ Good question. I don't think that she argues that male and female bodies aren't physically different, because they clearly are. I think she means that the concept of 'sex' doesn't make sense without the concept of 'gender'.
So, you perform your gender in a number of ways - the presence of genitalia is probably an obvious one, but there are other things like 'dressing like a girl' or other things like that. The thing is, through these performances you identify with (usually) one gender you impose a lot of different meaning on your body particularly but also your identity. The point is that the labels 'male' or 'female' are applied externally, there is nothing intrinsic within the body that makes it either male or female, those are the words we apply to them in order to make sense of that aspect of them. This is despite that biologically there is a distinction.
She also argues that all performance of gender is a form of drag because you are dressing up and acting a certain way to fill a certain category or label. The thing is though, this label is of our own construction, it's something we've defined as being crucially important. I think that Butler means that sex should just be considered to be an attribute (obviously an important attribute in reproduction and stuff) and it should neither shape other attributes (like, I'm female therefore I love shopping or something like that) or be particularly more important than other attributes.
Phew. I hope that makes sense.