There's no known relationship between transgenderism, and delusions or psychoses.
But there is a correlation between attitudes on gender roles, and gender dysphoria. In places where the line is blurred and people aren't throwing rocks at men for wearing a dress or at women for wearing pants, more people live the lifestyle "of" the other gender without sexual reassignment. This strongly suggests that for at least some percentage of individuals, the desire to change their gender is a sort of sickness created by society's behavior towards them. Compare a natural-born full hermaphrodite; they have everything, and all possibilities in theory, but we overwhelmingly assign whichever sex appears more dominant at birth for cultural reasons. Why can't they be permitted to be themselves?
To my mind, it is a delusion, if a relatively harmless one. What do I care if people want to change their gender? If I'm not fucking them, it's irrelevant. If I fuck one by mistake, then I should consider my dating habits in one way or another. Once you can wave a magic wand and reassign your gender properly and without complications or risk, then I'll be willing to believe otherwise. But which thing do I believe: that it's reasonable to be happy with who you are, or that it's reasonable to take a knife to parts you just don't like? I've been taught the first thing since birth, and so far I've never had any reason to doubt it. Elective and cosmetic surgery goes wrong all the time, and often produces less-than-desirable results.
On the third hand, nothing justifies treating other people like crap because you don't agree with their decisions. With that said, if you want to be called she even though your original equipment doesn't match the description, or even your current equipment, stop expecting me to use the prefix "cis". I'm not going to call myself cis-anything. By every dictionary definition I am a natural-born human male. I don't need to call myself anything-gendered because I am typical of the species, at least in that way. Of course, my equipment is unusually large, but it's the standard type. ;)