A defense for a broad and inclusive understanding of the terms transgender and trans.
I would say that you have nailed it with this paragraph:
"Carah’s worry is that a definition that accepts people as trans on the basis of gender expression only (as opposed to experienced gender identity) will water out the term transgender and undermine the understanding a fundamental, experienced, gender identity has for those who want to transition."
Indeed, and I'd say her worries are of a more practical, pragmatic nature (sorry, I should have read the thread on CDL first, but I'm afraid I haven't had the time yet): the more broadly the term 'transgender' is used, the less likely there will be institutional support (read: government money) for transition and/or activism in favour of trans rights.
I know this sounds harsh, but it's something that constantly worries me, and I have long talks with my therapist about that: what if we 'evolve' the term 'transgender' in a way that it ceases to be a 'medical issue', because it gets so diluted as to become meaningless? You address that issue in the section where you prophetise about a future society where 'genitalia' have zero influence on one's assumed identity & sexuality, and nobody cares about such issues any longer. Ironically, what our current societies are doing is to move slowly towards that — but in a perverse way, namely, by 'pretending' that things such as 'transgenderity' do not *truly* exist, they're (at best!) just annoying feelings that some people have when having to 'decide' upon their identity. It could be argued that *everybody* goes through that phase at least once, during adolescence; it's just that some may take longer than that.
In such a world, there wouldn't be 'cis' or 'trans' persons: there would be just 'normal' people — with an infinite variation of possibilities, not set beforehand — and 'abnormal' people who simply couldn't make a decision on where they stood (and who, eventually, would be 'worth' being helped to figure out where exactly in the spectrum of 'human diversity' they fall).
When sharing such thoughts with my therapist — I admit that I never feel 'trans enough' to get rid of my life, ignore my past, break all bonds, and just move on — he reassures me that, from the perspective of his medical class, there are two very different things to be dealt with. One is the so-called 'gender identity' — which is not set on stone and can be anything in the spectrum. The other thing — let's call it 'gender dysphoria' for the sake of the argument and for the lack of a better name — is the anxiety of not being sure where in the gender spectrum someone is. The former is subject to discussion — even on the philosophical and political arenas. It may be even argued that a definition such as 'gender identity' might not be needed at all if we can get everyone to agree that presentation & identity are _not_ binary. However, the anxiety (and related mental pathologies) will still be acutely felt by some, and this means that they may require — and should be entitled to! — access to medical experts in the area (as well as all the remaining tools of the trade, from hormones to surgery).
Alas, due to the ever-evolving nature of words such as 'transexual', 'transgender', 'gender identity', and mixing it up with politics, we get lost in a forest of concepts, while forgetting about the essential issue here: some people need professional, medical help to deal with their position in the vast spectrum of human diversity. Until recently, 'transgender' was the more appropriate term to designate such people, even if it tended to classify transgender people at having some sort of mental disease (which is the undesired effect of such a classification). But, for some, it's better to be labeled as having some sort of issue — and getting help to overcome it — than to face anxiety, depression, or even suicide due to lack of available help.
And on the flip side of the coin we have a huge number of people that are effectively *proud* of *not* being 'cis' and who wear the 'trans' tag as a badge of honour, and expect respect. This just makes things much harder, and moves the binary divide from male/female to cis/trans. But I fully agree that such concepts continue to fuel the idea that there _is_ a binary divide, and that only perpetuates the suffering (both from trans people who wish to be treated with respect as well as from cis people who just want trans people to make their choice and be quiet about it!).
Ah, this is too complex to analyse in such a small space :-)