I did not find this sketch offensive at all. I watch Conan every night and he mocks everybody. Many comics focus on mocking celebrities, but Conan spreads it out. He also does more self-mockery than any other comic. We don't need to be above a little mockery.
However, this sketch didn't even mock transsexuals. It was more mocking of tabloids and himself. Conan was setting up an embarrassing picture of himself to sell to the tabloids. This is a running gag that he does about once a week, so he has to dig deeper every week to come up with something better than the last one.
Conan was setting up a picture of himself being drunk and caught in an embarrasing situation, in this case a strip club. So he has two gorgeous models laying on his table. So he says, "Let's make it more embarrassing," and the sign for the club changes to ->-bleeped-<-s, and the women put on fake mustaches. Even now, it makes me chuckle.
