There can be serious damage done to anyone who is misdiagnosed with anything in DSM-IV, not just autogynephilia. I don't think we are the only ones that have been harmed by medical incompetence.
First, every scientist brings their personal biases to their research whether they know it or not. This explains why research is published so that other scientists can attempt to duplicate the research to validate or refute the findings. There have been many scientists in all fields that have published their research only to see it being invalidated...
Not being a psychologist or a research scientist, I have not examined Blanchard's data, research, or evaluation methodology and am not qualified to determine if what he says is BS. However, there are a number of anecdotal statements by enough people to make his theory plausible. But, like you said, he may have things backwards.
Second, I'm not sure how this is an example of bigotry and not just poor research... Does he propose in his research findings criminalizing people with gender issues and putting them in jail?
Robyn P.