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The transgender phenomenon is likely an intersex condition, as there is a measurable difference between the hypothalamus size of cisgender people and transgender people. I won't go into the details here, but M2F TG's have a hypothalamus size of a typical cisgender female. Considering what I've learned from an introduction to cognitive psychology (how the structure of the brain itself is reflected in basic mental processes), it makes sense that gender identity and preference are encoded in "lower order" brain structures.
Humans, unlike most animals, have an extremely well developed pre-frontal cortex in the brain. This structure is responsible for most "higher order" thought - including many of the very things that make us truly human. But the pre-frontal cortex can't act alone, as it is connected to the rest of the brain. And this is where it can get interesting to those who want to examine the internal processes of our minds. This is not a direction I want to take in discussing gender, except to note that for transgender people, their relation to the idea of gender will be much more complex than cisgender people because of how we cope with a dissonance between our internal gender identities and our external genitalia.
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I prefer to focus on gender and culture. For example, what is the first question asked when a baby is born? It is usually a question to determine the newborn baby's sex. The answer to that simple question, in many cultures, can determine virtually everything that person will do for the rest of his/her life. This question remains extremely important throughout life, enough so, that clothing and accessories are used to indicate gender and to fix people in their assigned gender roles.
When I started my experiments with female presentation, I wasn't sure that I was transgender. I felt that I was simply a crossdresser looking to perfect a female presentation. But when I saw a female friend stripping off her sweater, leaving her breasts covered by her camisole, I suddenly realized that I was transgender, and not just a vanilla crossdresser. If a straight cisgender male were to see those breasts, he'd have thought: "Look at the rack on that gal!". But a female would think: "Those breasts are beautiful; I wish they were mine!" And yet, they are the same breasts on the same woman. Why are breasts so important?
Both genders in most societies cover up their genitals. But men are often allowed to expose their chests in public, while women are not. What is the key difference? The female breast can be used to nurture life - a power that men may fear subconsciously, as their power focuses on the taking of life (as a hunter). What's so dangerous about a breast? Can expressed breast milk cause harm? No, yet our society demands that a woman covers her nipples, if not both breasts.
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Living in both worlds, I've seen that women act and talk in noticeably different ways when men are not around. In many ways, they are freer than most men would be when not in the presence of the opposite sex. Part of this has to be related to how the two genders have been programmed to react to each other.
Studies have shown that girls learn better in same-sex classes, while there is no appreciable gain for boys when they are in same-sex classes. Why is this? It is acceptable to program males to be Type-A people. Dominance is an acceptable trait for males, while it tends not to be acceptable for females. Males (as a whole) dominate via physical strength, and not their ability to communicate their ideas. It's as if biology has put a tendency in humans to force females to defer to males. And even in adulthood, when males enter a female space, that females tend to defer to those males - unless the males are greatly outnumbered by females, or when males are perceived as non-threatening, such as the case with gay males.
So what are we seeing here? I think it's nature's crazy way of divvying up power between the two genders. Intellectual skills tend to develop earlier in women than in men, and they tend to have an intellectual advantage throughout life. Although males tend to have more brute strength than females, it seems to be balanced by the female's greater ability to use her mind and body to manipulate the male to serve her needs. (This is not an absolute, nor do I mean this in a Machiavellian sense.) The two genders tend to be equivalent in skills, talents, and powers, but definitely not equal in any sense.
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It saddens me to find that "conservatives" in our society place so much value on gender. What makes things worse, is that their standards are geared to prevent women from having control of their bodies and their lives. What always surprises me is that many women accept this control by men. Could it be a long term system of intimidation learned in childhood which keeps women in line? And why is this the case? Do traditionalist men fear empowered women this much?
Sadly, I think we're entering a period where traditionalists have gained an upper hand. Although I don't see much short term risk where I live, I do see things getting worse in less progressive areas of the country. I hope I'm wrong, but I think we will be dealing with a polity who doesn't care about the subtlety of gender related issues. Instead, I think that this polity will go back to fitting square pegs into round holes, so that they can reestablish the dysfunctional world of their dreams.