My 2 cents on the issue at YU:
1. Personal choices of faculty members are no business of the school. People have been suggesting that YU would have fired this teacher had it not been for the legal issues. I hope that's not true. I hope that they would have been concerned with the moral issue as well (assuming said teacher did nothing to actively defame or disgrace the school).
2. YU is not the first Yeshiva, nor the most left-wing yeshiva, to have an unconventionally gendered teacher. Several prominent yeshivas had such teachers on their limmudei kodesh faculty. Some still do.
3. I find it shocking that Richard Joel said that he is proud of all of his faculty. I think pride is the wrong term. I would not be proud of this professor, per se. I would also certainly not be proud of Rabbi Dr. M. D. Tendler for his response to the issue.
4. Halakhic article on the issue here.
5. I remember when a former student of mine informed me that he would be starting the process of becoming a woman. No, he was not asking a shayla. What do you say to that? I quoted some psukim to him from the end of Yeshayahu 56, that the sarisim who keep Shabbat and choose that which God desires are assured a legacy. I do not know if this person still keeps Shabbos. I really couldn't think of much else at the time. Ah, the life of a college campus rabbi. Seems so far away now that I've settled into the Orthodoxy of the bourgeoisie.
6. I blogged about the transgender issue a few years ago (link, link, link). In one of those posts, I suggested that, mimah nafshach, a male-turned-female could marry a female-turned-male halakhically. The question is who gives the ring/ketubah to whom. At such a simcha, we would certainly say, with our tongues in our cheeks, "matza min et mino".