I feel obligated to play devil's advocate, since no one else here wants to defend the other side, or even acknowledge it's validity.

The argument is, no, a project can't accept work without condoning one's public character. If someone publicly says "I'm a developer on this project, and trans people are bad," that associates that project with their bigotry. It not only makes people reading those statements assume that the project itself supports that hateful position, but worse, it makes anyone of the discriminated class feel unwelcome. Can you honestly imagine a trans person feeling comfortable using or contributing to that product, now?

Your statement parallels the debate in the thread, which can be summarised as: "are projects code or people?" The contributor in the thread argues projects are code, and do not involve any human element. Which is approaching clinical sociopathy. Code doesn't create itself. Projects don't exist in a vacuum. Humans work on projects. Together. And when one of those humans is publicly hateful toward a class, members of that class with healthy, natural levels of empathy are not going to feel comfortable working with them, at the very least.

Beyond alienating members of the community, as you say, it is condoning his actions. To accept someone's work is to accept them, and on some level to tell the world "it's okay to be transphobic, we'll still take your work!" After WWII, the US employed numerous Nazi scientists and engineers, many of whom had committed war crimes. Such actions send an unequivocal message to the scientists of the world that they can do heinous things and aid and abet genocidal maniacs, and the US government will gladly employ them. Now, a transphobic tweet isn't quite the same as a war crime. But the message and effects are the same; they only differ in degree.

To be clear, I'm not sure which side I agree with. But I certainly believe the argument is valid. And accepting the work of a transphobic contributor will make people in the trans community feel hated and unwelcome. That's a fact, not an opinion. And I tend to think there's something wrong with that.