It certainly doesn't look like that:
Mind that "bulge" doesn't mean erection but "The outline of male genitals visible through clothing"[
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], so, it's compatible with a flaccid dick, even more, if Dany's on hormones, which is known to decrease dick size. Also remember that was Dany who asked Jade something about if a male to female was male or female, to which the latter redirected the question to the MC to reply. Probably, Dany was just testing the MC to know who he was, and it was a rhetorical question. And Dany said to JamJam he would only allow him in the ass if he let Dany do him first. I think we have a theory! Where's Dahli?