I think you are stretching this a little too far. When someone says a common use word in a context it is normally used, it means what the word means. If we are just going to say everything is relative to the individual, then words have no meaning at all. It's fair to say that a mistake was made by offering it as a "realistic" story.
Not sure I agree. "Realism" is a sliding scale, and can be in reference to different aspects.
Take for instance pornography: all live action films by real actors in a modern setting are in a realistic setting (and constrained by the rules of real life. So for example, you're not gonna a guy showering a girl with a literal gallon of cum). But while the setting is realistic, that doesn't mean the story or the activities inside the pornography are "realistic".
Or take the other common criticism of porn, that porn star body types aren't "realistic". Obviously they're real: this is a real person that really has tits that big. But in this case, the realism criticism is being levied because such a body type isn't common and doesn't "feel" realistic.
Or take for instance the genre of science fiction. Is realistic science fiction impossible by definition, because there's "unreal" elements? Of course not. Each story has to pick where on that scale they apply realism. Song of Ice and Fire/Game of Thrones is often praised for the complicated (and often described as realistic) characters. But of course the setting itself and the history there is fantastical. Is Breaking Bad not "realistic" because the show gets some chemistry wrong?
Bringing this back to feminization fiction, there's going to be breaks from reality because ultimately, real world transitioning isn't very sexy. So like with scifi, when someone describes that their feminization story is a realistic setting, that can be in reference to any number of aspects. It might be that they aren't employing any magic or too advanced technology, and it's just that they've taken some liberties with recovery time/how good a person could look after hormones/sugery.
It could be that they're referring to a realistic *reason* someone might be getting feminized, but the actual feminization isn't necessarily realistic. They could be referring to the setting, where it's realistic as in it takes place in our modern world, not some fantasy/scifi setting. There's any number of valid reasons why an author might think of their work as being realistic, despite containing non-real elements. And that doesn't require bending the definition. It just depends on the work and what they were hoping to achieve. Whether the author was *successful* at being "realistic" in the aspects they were wanting to be "realistic" in is another topic entirely.
One thing authors do get wrong though is not understanding that there's a useful difference in doing something "realistically", vs handling it "authentically". Being overly slavish towards realism can come at the expense at plot, characterization, and satisfying conclusions. Easiest example I can think of is in video games. Some devs and players love trying to use "realism" as if it were the best thing ever. Yet, more often than not, they just want to have the game feel authentic, not actually be real. Travel distance is the easiest example. People like big maps because you get the sense of exploring a vast distance, but no one actually wants those distances to be real world big. It would make for such a slog to get anywhere.