This is so obviously offensive that I'm almost surprised that it needs to be explained
Well, it's not obvious to me, even after reading the explanation several times. Perhaps I'm clueless, or I belong in the Slow Learner Category, but I don't get what Jim did that was SO offensive. Katy had many choices about how to handle it, and being outrageously offended and then retelling the story and outing poor ol' naive Jim wasn't the best one.

The take away lesson for me from all this discussion here and in a related thread about gay bars is a reinforcement of the idea that crossdressing is no more accepted by the gay/lesbian community than it is in the mainstream.

What do you think these two people have in common exactly?
Jim and Katy were friends, they worked together and traveled together on business. It certainly wasn’t a cold approach on the first day on the job in the lunchroom. There was a time that I might have thought that someone in the gay/lesbian community might have been more accepting because they have experienced “being different” in sexual and social terms and all that goes along with it and might have been empathetic to someone else dealing with an aspect of their sexuality. I’m taking a wild guess that Jim thought so too, and I am also guessing he was quite taken aback by Katy’s reaction.

But I am now the wiser for having been around the block once or twice, and also for reading these threads and others. Coming out has its risks and many threads have been devoted to that general topic. I’m totally out to the only person who really needs to know –my SO- and she is totally cool with it. I don’t have any plans to come out to anyone else –gay, straight, bi, whatever, and run the risk of offending them.