No, it doesn't. A gnome wearing latex is silly, and it's strange. It might threaten suspension of disbelief (the ability of the audience to make themselves believe in what they see). It does not speak directly to the audience, and thus does not break the fourth wall.Besides, it kinda breaks the fourth wall, right?
It is however an idea so completely silly that I have no wish to work on it right now.
The Equal Rights for Gnomes thing has a good chance of making it into the mod at some point.