I don't see why it would be transphobic to keep them. Most trans people understand that people are born in 2 sexes and then they believe they can change their gender.
Are the devs saying that in this case those types "1" and "2" are not even sexes? What are they then? Fluid amalgamations of combinations of elements of them?
In that case they should do it correctly. Have penises and vagina options. The way it is now you sound as if you try to sexualize children's toys for no reason.