Honestly, it doesn't surprise me one, single bit. I have seen this argument often enough that it has become comedy gold for me.
Usually it starts with one person asking 'Is futa avoidable?' or announcing that 'futa is gay.' and the entire conversation starts spiraling out from that point.
I haven't played this game yet (just found it today), but personally, my guess is that the 'tranny dick' is completely avoidable and probably tied to some corruption score or some scene you have to trigger.
I just wish there were more reviews to give me a sense of how good/bad this game is, it seems like it is pretty good since everyone is arguing about something other than 'bad translation' or shitty game play.
It is hard for me to guess about Japanese RPGM games, since they could be 1-2 hour visual novels with crappy game play or they could be 60 hours of pure awesomeness.