Look at the way you couch the employee in your scenario:
“Then, in the 7th year, he starts wearing women's clothing and make-up, and insists that people call him by a female name and use female pronouns. This creates a stir amongst the elderly attending funerals and detracts from the solemness of the wakes and funerals.”
You assume that the good employee suddenly becomes “bad business” by virtue of her new sexual identity, — not because of the employee’s misconduct, but because of the way you and others perceive her new sexual identity. You assume that by itself is grounds for firing, - which is exactly why the Court ruled against the Michigan funeral home — who fired their employee because “this isn’t going to work.”
You assume the employee’s new sexual identity will cause a stir in the community and a loss in business. You pre judge the economic consequences because you assume the patrons are just like you.
Give us a scenario where the employer supports the good employee through the transition, through thick and thin, and despite those efforts over a sustained period, the business spirals downward, not because of the employee, but because the community has too many judgmental Neds with sticks up their ass.