I don't think it is a delusion at all.
But even if you think of it as a mental health issue. Wouldn't it be more helpful to treat them in a way that makes them more comfortable? Just basic human decency. At least for me, I would feel uncomfortable or maybe even slightly offended when someone would treat me as a another gender, I don't feel part of, especially if they know better. (Not LGBTQIA, so I can't say much about that).
EDIT: removed an accidentally offensive part entirely. Sorry :(
Treat it like a name. You don't need to learn all of them but when someone shares theirs with you, learn it and what it means or it'll be very rude towards them.
To put it into context, it would be like everyone would be called Joe and Mary, which would be very boring.
I don't think it'll go that far. What I'm more worried about is that the spec calls for multiple attesters. So Microsoft and others might even make their own under the spec.
Sigh opens user agent switcher