I completely forgot about this (well, more like blocked the memory).
I know a transgender person in real life. For years we've had a professional relationship together - and we are friends. When I first met this person he was presenting as a male. After working together for a couple of years he/she came out as female - and informed all of us that she was coming out. Okay, cool. It was during his/her coming out period that I noticed a lack of confidence over transitioning. He/she was always asking the rest of us for permission to wear women's clothing - if it was okay if she/he wore this or that.
One night the lack of confidence showed itself yet again. That's when I flippantly decided to use an opposite psychology approach to address the issue. I wasn't being mean - but, I felt that this person just needed a good kick in the ass. Just put the f'ing dress on or quit asking us if it's okay. So, in a tough-love style I said something like, 'we're going to put you in the girliest tutu and make you wear that in front of everyone next week.' I suppose that was my old school approach - similar to how they once taught kids who were scared of the water how to swim - just throw 'em in the water - and it'll work itself out.
Boy, did that approach backfire on me. Anyone care to guess what unexpectedly came up - and totally blindsided me?
Apparently, He/she liked that I was verbalizing the act of 'forcing' her to wear a tutu - AND THEN ADDED to that conversation by suggesting that we also put her in a chastity belt. We work together - the work we do has absolutely nothing to do with kink or crossdressing whatsoever. Most importantly *I* do not want to interact with this person sexually in any way at all - ever.
You can't make this shit up. I just looked at him/her straight in the eyes and said, "What the fuck!?!?" and never interacted on that topic ever again. Jesus.
It was then I made a mental note that all of this, the crossdressing, was just a fetish - at least with this one individual.
Digressing...
Youch. Yeah that seems definitely over the top.
IF that person was truly hurt, I hope you were able to apologize (not for your thoughts but for how/what you spoke). Your first thought to just say "We're all fine with you being you, but were not fine with you constantly asking for permission when we already approved," is
extremely VALID!
Because "her" constantly doing that is almost them pulling you all into "her" kink, whether "she" intended to or not. Just as we wouldn't ask if it's okay to wear chastity at work and a woman who is submissive at home wouldn't ask permission to use the bathroom or sit in a chair just because their home dominant told them to.
Or, even worse, this person may have been constantly asking hoping elicit a moment of humiliation or public shaming (it's possible but odds are against. For example, waaaay back in middle school, a girl I knew pretended to be lesbian in order to get attention and would try andbait people into saying anti-gay things so she could react in an offended manner. Nobody took the bait and she wound up giving that up!).
Either way, it's wrong for "her" to do that.
You mention CD being a fetish. I'd tend to agree with that, and might even go so far to say that CD in a vacuum could be considered inappropriate in the work place...? However... if this person is "transgender", that's not a fetish. That's a whole different thing that doesn't have anything to do with sex/kink/fetish/arousal.
Most likely is this person, though brave enough to come out, has spend the majority of their life feeling EXTREMELY insecure, and "she" feels a need for validation and comfort and approval. Problem is,
it is NOT "her" co-worker's responsibility to provide anything other than a safe/accommodating workplace. So you were right to say something... but that something just happened to be "not the right thing".
Man, this thing went 90 degrees, didn't it? LOL
So if "she" happens to do that again, that's the approach I would take. Explaining that it isn't appropriate to "involve" you all in affirming their sexuality that way. "She" might see the light bulb go off and become aware that's what "she" has been doing, and then it likely would never happen again.