Cursed by the Prophet?:
Basically the only reason that scholars may find for condemning transgenderism in Islam is a certain saying of our noble Prophet (s.a.s.) which can be found throughout several hadith collections in many variants:
" The Prophet (s.a.s.) cursed the mukhannathun among men and he also cursed the women who ape men. He also said: Expell them from your houses."
Before I will go into detail with interpreting this hadith in a way positive to today` s transgendered Muslims (which is no problem at all), let me say a few points about the correct usage of the ahadith (the sayings of the noble Prophet): The ahadith are without any doubt after the Holy Qur`an the second most important source for our Muslim faith and our day to day acting. The Prophet is the perfect example of a human being that has come most close to God (an
insan i kamil) and to be a good human being we have to try acting in his ways.
However, our noble Prophet (s.a.s.) also said that he is just a "normal human being" and that he should always be seen as such. Although he was definitly the most perfect human being there were still some incidents during which Muhammad was "rebuked" by God, e.g. during the infamous "necklace case" involving A`isha, the mother of the faithful. He himself was always aware of this and we should be, too.
We should also bear in mind that it is proven that many ahadith have purposely been invented by people with evil (political) intentions and were never uttered by Muhammad (s.a.s.) .Although muslim scholars have been working hard to segregate these fabricated ahadith from Muhammad`s true words, these scholars themselves, much more than the most perfect being Muhammad, were simple humans, with prejudices and failures. There may be an 95%, but never a 100% assurance that a certain hadith has really been said by our noble Prophet (s.a.s.). Because of this the ahadith´s importance in Islam should in no way be seen as comparable to that of the most perfect word of God, the Holy Qur`an. Having said that, one should be aware of the fact that the Holy Qur`an is
totally silent on the matter of the mukhannathun. There are some cases (see e.g. A place in society!) where scholars attribute the meaning of a certain passage to the mukhannathun, but in this case the meaning is in no way negative, it could even be called positive.
On these grounds - even without interpreting the above given saying of Muhammad -
it is very doubtful and it means to "walk on thin ice" to condemn transsexual muslims because of that hadith and its variants!
Tamam, but let` s now speak about that certain saying:
The saying starts with
"The Prophet cursed......" . To anyone who has some knowledge on the ahadith this is quite a familiar expression. There are several ahadith that start that way (or similar). Actually, there seemed to have been a lot of people who earned the curse of our noble Prophet (s.a.s.) . Among them there are especially mentioned musicians and poets , but also tattooed people, people with wigs etc. At first sight it seems strange to attribute these sayings to a general moral behaviour. Can wearing a wig really make you a bad human? Will it bring you to hell? And listening to music? But some modernist Muslims  really act like that. The Wahhabi -Salafi trend of Islam, originally a tiny extremist cult of trespassers  that nowadays gets a lot of attention from desillusioned youth, totally forbids any kind of music and any kind of worldly poetry. These are considered to be very big sins, part of the way to hell, by these cultists!
But fortunately the majority of the muslim scholars never agreed on this. Now for centuries music and poetry are integral parts of muslim culture, never forbidden by serious scholars. These scholars were intelligent enough to study - always the prevalence of the Holy Qur`an in mind - other hadith reports and the opinions of earlier scholars. There are numerous ahadith in which Muhammad is shown as listening to music or enjoying poetry. How strange!!!!!!
Did Muhammad act against his own commands? Certainly not!!
The scholars discovered that the mentioned ahadith on music, poetry, musicians and poets were directed towards special musicians, special poets, a special kind of music that probably was present when the noble Prophet (s.a.s.) uttered these words. Because music and poetry have a "huge lobby" in this world these facts are widely known in the muslim community and most muslims are in no way worried that their like for music will turn them into inhabitants of hell.
It is widely known among Muslims, that listening to music or playing it has no corresponding equivalent among the punishments in true islamic law.
However, many muslims connect the mukhannathun with homosexuality and attribute very harsh punishments (sometimes even death) to both of them.
The mukhannathun, the transgendered muslims, never had a big lobby in the muslim world - transgenders never had it anywhere - and so many muslims and even many muslim scholars of today are not aware that the above stated hadith and it`s variants were most probably uttered in circumstances similar to those that led to "cursing musicians, cursing poets".
This is evident from the opinions of early and respected scholars of Islam (may God be pleased with them).
It is reported that
Ibn Hanbal said that the earnings of the mukhannath are foul (khabeeth), because of the unmoral way of the songs "he" sings".
The mukhannathun of Madinah were to a great degree erotical entertainers singing  songs not in accordance with muslim ethics. Those mukhannathun were to be expelled from the houses of pious muslims!!!!
The ahadith that condemned the mukhannathun were always seen in that context:
The famous scholar and ahadith collector An - Nawawi wrote:
"A mukhannath is the one ("male") who carries in his movements, in his appearance and in his language the characteristics of a woman. There are two types; the first is the one in whom these characteristics are innate, he did not put them on by himself, and therein is no guilt, no blame and no shame, as long as he does not perform any (illicit) act or exploit it for money (prostitution etc.). The secodn type acts like a woman out of immoral purposes and he is the sinner and blameworthy."
Furthereon, An-Nawawi explains that the negative hadith reports only mean the second kind, not the mukhannatheen in general.
Early scholars recognized a difference between those negatívely portrayed mukhannathun of the hadith reports and the mukhnnathun in general. In that they followed the example of the noble Prophet (s.a.s.). Actually, although many muslims today claim that a transsexual should be punished severely, there is no such report from Muhammad`s life. Even long after the time of the Prophet  muslims accepted the mukhannathun in the sacred boundaries of Makkah and Madinah!
In one case the people brought a mukhannath before Muhammad ( s.a.s.) to let him/her be punished . Muhammad sends the mukhannath away to an oasis out of Madinah. The people then asked:
"Apostle of Allah, should we not kill him?" - He said: "I have been prohibited from killing people who pray!" , sparing the mukhannath and, even more, accepting him/her as a fellow praying muslim.

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