I think the first step needs to be asking why we do this and what we want. We have women’s sports because (cis) women generally cannot compete sufficiently with (cis) men. But what are we trying to accomplish? I would say in middle school and high school our goal should be inclusivity. So trans men and women should be able to compete in their identified genders.
On the other hand in college and the Olympics inclusivity is probably not as important for adults competing at some of the highest levels. So I am more willing to accept some limits, but I’m certainly not well versed enough to know where to draw that line.