Miss Manners would say:
Yes.
Acting like someone or something doesn’t disturb or distress you, even though they do, is called “being polite”. You’re not obligated, though, to spend any more time around them than work or family obligations require you to.
It really is just like how you’re not supposed to tell Great-Aunt Matilda that you think her tuna casserole, which she cooks for family reunions, looks and tastes like vomit, even if it does. You just don’t take any, or take a tiny bit and toy with it, and talk to her about topics other than whether or not you like her casserole, or spend most of your time talking to someone else. You could talk with your transgender co-worker about topics other than their recent sex change if talking about sex changes disturbs you. Like, I don’t know, the project you’re both working on, or the local sports teams. If your colleague really wants to know your opinion about their sex change, they will ask you.
Miss Manners has had at quite a few people for citing “honesty” as an excuse for rudeness. It is possible to be both honest and tactful. “Why’d you do that to yourself” is not tactful by any known definition of tactful.
The whole point of etiquette, indeed of acting like a civilized human being, is to put the comfort of others before your own personal comfort. When you live in a civilization with other humans, you don’t get to have everything your own way all the time. You have to think about what other people want, too, if only because you want them to think about what you want.
Incidentally, begbert2, I’d be quite offended if you refused to call me by the name of my choosing just because you think, applying some arbitrary criterion of your own, that it’s too silly. You don’t get to pick everyone else’s name for them, you know. Nor do you get to pick other people’s genders for them.
Just call people what they want to be called. It’s really not hard. And it spares you the awesome responsibility of deciding, for everyone else in the world, which names are acceptable, who’s a man, who’s a woman, and so on and so forth.