If the guidance is as reported it's a utter, offensive mess. Ideology over all else.
This basically means that trans men are excluded, practically, from almost all spaces. And that legitimate aim is so broad as to be impossible to challenge
The thin core of sense in this ruling is attempting to match minimizing 'alarm or distress' with a proportionate service exclusion.
The bathroom obsession is the antithesis of that. It's mostly manufactured alarm (for all gender non-conforming, not trans), plus massive disproportionary exclusion
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That rationale was always allowed and functioning (!) - delegating authority and legal cover to (say) someone running a women's shelter for an ad hoc solution to protecting cis and trans ppl in their care, where high distress around presentation might match a proportionate adjustment to service.