I think the ban was a little too harsh, but removing that comment was the right decision.
I also see a few problems with your “your highness” comparison:
“Your highness” is an official title, not a personal designation. Its proper usage depends heavily on the context, e.g. the perceived social rank and status, how well people know each other, if it’s a formal or informal conversation, and so on. Pronouns have none of that, you just use the one people identify as and that’s it.
It implies that people just pick whatever term they can come up with to mess with others or to mock them. People don’t choose a pronoun lightly, they usually think about it a lot and it’s an important personal decision. They also usually pick one of the common pronouns, so it’s really not hard to just use it.
Making quick logical comparisons regarding social norms is a very tricky thing in my experience. There are many things going on that we aren’t fully aware of all of the time, and getting it wrong can hurt people badly.