All fish can pale out when stressed. They actually use energy to maintain their color, so if the energy is needed elsewhere they can appear washed out. Most likely, if the other is picking on the paler one to establish dominance that is the cause...but keep an eye out for other behavioral symptoms like scratching, swimming directly into flow, rapid breathing, etc.
As far as turning male goes...leopards aren't typically quite as quick to turn male as fairy wrasses or even halichoerus, but it's still definitely a possibility. You'll notice a gradual change in color and pattern, until eventually one looks like this:
Could take weeks, or years before one turns.