It's a really difficult one. In my humble opinion, sex isn't malleable. Regardless of surgery, name changes, hormonal treatment and makeovers, I don't believe that you can amend your sex either physically or legally. There are real ramifications for doing so. It's an illness and I wish whomever is afflicted with that, only the best of luck in resolving it in whatever way they see fit. I'm all for people being comfortable with who they are and being supported by society to do so - but only to a point.
I'm of the opinion (and I believe the vast majority of people are) that if a bloke wants to wear a wig and a dress, walk down the street and go about their business, go for it. If it makes you happy, you should 100% do it. If you want me to stop calling you Dave and start calling you Sasha, i'm absolutely fine with that. I'll treat you with the same level of decency and respect that I afford to everybody else.
There are some conditions to that though. Firstly, if I slip up and accidentally refer to you as 'he, him' (as it's the only system i've known for 30+ years) you have to accept that may occur. With me and others, fairly regularly. Businesses have been sued and people have lost jobs for misgendering, regardless of intent or whether it was deliberate. This, I have real problems with. I'm all for integration and inclusion but to ask people to conform to a system that seemingly has no parameters and nobody truly understands, is equally unfair.
Secondly, you can't be surprised if people are shocked to see a bloke wearing a wig and a dress. They aren't being transphobic. Quzzical looks and staring is going to happen. In time, if that starts to become a more common sight, this may not happen, but right now it does. Being a bloke able to convincingly masquerade as a woman (and vice versa) is a rarity.
Thirdly, just because you're a bloke wearing a wig and a dress doesn't mean that you're entitled to special treatment. Victoria Secret are not being transphobic if they don't let you model their stuff. After years as Dave, I don't think it's fair that you should be able to compete in womens only sports events as Sasha.
Ultimately, even with the very best intentions, there are certain elements of our society who adore being offended. They actively seek out offense. For many, that will never change. That plays a big part in this conversation. As others have said, I think a dialogue is important for this stuff and for that to happen, it will require less of the professionally offended stuff and more open minds.