Preliminary list (alphabetical) includes:

Kathy Acker

many of her works, though not necessarily as obvious a focus, as her work was just flat-out queer and polymorphously perverse.

Poppy Z. Brite

most works. See also

Mary Renault

mainly her series of books set in Ancient Greece, especially those dealing with Alexander the Great. Titles include The Persian Boy, The Charioteer, The King Must Die, and The Mask of Apollo.

Anne Rice

most of her works, particularly the Vampire series, but also Cry to Heaven and much of her erotica written under the pseudonyms A.N. Roquelaure and Anne Rampling.

Marguerite Yourcenar

Memoirs of Hadrian

semi-anonymous authors

There is a strong subset within "slash" fanfiction of writers who (at least) present themselves as women, and have a distinct fascination with the gay subtext and potential erotic combinations of various television (and other fictional) characters. This is not limited to Xena: Warrior Princess fiction either, and dates at least as far back as the Kirk/Spock combinations that are credited as the origin of slashfic.

Speculation on why this type of writing is rendered "invisible":

See: Silences by Tillie Olsen, the works of Marjorie Garber, and other works in cultural studies and feminism on marginalization and erasure.

Please /msg me with additions for this list. Thanks to those everythingians whose softlinks have added to this list as well!

Actually, this phenomenon is very common and widely accepted in Japan, schoolgirls reading yaoi or shounen ai ("boys love") manga are a frequent sight in subways, and the comics section of bookstores have dozens of titles of this genre.