In the psychiatric trade, there is an often-voiced practicality that says: "People who are considered mentally ill, are usually lacking in Coping Mechanisms." Now, what they mean is basically the ability to "cope" with what the rest of Society is dishing out!
Since most of us who are TG or TS seem to be "coping," I would doubt we qualify as mentally ill. But, there are individuals who do not seem to be able to handle all of that giant boxcar of guilt, manipulation, rejection, and downright antagonism, that other people may try to dump on them. If they accept what others are projecting, it can certainly make them mentally ill!
So your answer is a qualified "yes and no." Most professionals who are working with The Transgendered in these modern times are trying to help those folks and their families to "cope." Past Purveyor's of Their Own Truths have become outmoded. Soon, they will become extinct! Treating us as mentally ill is certainly becoming passé. Who needs to be "treated" is a Repressive Society.
Remember just a few years ago they equated being gay with mental illness. Our being painted with the same brush? "This too will pass away!"
Peace and Love, Joanie