This is a fair question, and it's one I did spend a good amount of time thinking about. It really isn't an easy question to answer, especially since the immediate reaction from some people is "well you're just a bigot" if you're not okay with it. I do think it's an important question to answer, as brushing it off will do nothing for progress. However little it might be.
I think it is largely a matter of perspective whether or not you get upset if someone misgenders you. People have misgendered me in-game before, and I imagine this happens a lot in general. Especially if a player intentionally chooses a gender that isn't their own. I don't get upset if someone misgenders me, in fact, I think of it as sort of a psudo-compliment.
Let's think about the psychology of misgendering. If someone refers to you as "she", that's due to their own perspective of who/what you are, based on whatever limited knowledge they have, and not out of intent to how you will feel about it. However you take it depends largely on your own perception. What is the big deal with someone calling you "she", whether it's accurate or not? Is there a problem with being female? Is there a problem with being male? Why? Why would you feel hurt instead of feeling complimented? Why feel strongly about it at all?
We're not even talking about misgendering in real life though. We're talking about misgendering in a game, where you have free reign to choose what your gender is, among a host of other features. Then, to take it a step further, we're not even talking about a human misgendering you. We're talking about a computer program. Is it the program's fault that it called you "she" when your pronouns are "he/him/they"?
Now, you might say, you know it isn't anyone's fault that you felt hurt or offended. That is just your natural response whenever you get misgendered. Fair enough. Then in that case, I would say it is up to you to improve yourself, so that you can rise above feeling offended when there is no offense given or intended. You have the power to feel how you want to feel. That is personal strength and responsibility. That you might still feel offended, but you understand that it is a personal thing and you shouldn't expect the world to change just because you have a personal issue. Everyone has personal issues that they work through everyday.
But there are those who aren't so understanding. There are those who expect everyone else to change themselves around them just so they can feel better. They don't accept compromises and will act unpleasantly until they get their way. Don't get me wrong, I'm not saying everyone who is like this is a coddled spoiled brat. Everyone is different. What I'm saying is that there is a spectrum, and those that support this feature implementation are in favor of those higher on that spectrum to always get what they want.
Look, at the end of the day, this is just another part of the political culture war. You might say that "people's identities aren't political! They're human rights!" Yeah I've heard that one before. See above for the rebuttal to that statement.
Would this feature ruin the game for me? Absolutely not. But it is a small step in making this game more enjoyable for a certain group of people, and less enjoyable for another. I'm on the latter side, and I will do what I can to make this game more enjoyable. Not just for me, but for the majority.
Thank you for coming to my TED talk.