I suppose in an ideal game, there would be two further options:
- a.) NPCs respect your chosen pronouns
- b.) NPCs use pronouns matching your presenting sex, along with all the stuff that comes with that.
The latter would address the things you take issue with @OP and provide a more "realistic, immersive" experience (if possibly a more hostile, un-fun experience).

People (can) play games as an escape, so allowing the option for NPCs in this fantasy world to always recognize you by your preferred pronoun can vastly improve some people's experience with the game.

But, Larian has limited resource and time, so if the choice is between "you can't choose your pronouns" and "you can choose your pronouns and all NPCs automatically respect that choice"...the latter seems strictly superior as it adds an option without affecting gameplay of the first choice.

Last edited by mrfuji3; 18/12/22 04:33 PM. Reason: p.s. I only skimmed your post OP. It's long.