That's a problem, but it's a GOOD problem to have. Step back out of the panic for a moment and look at the positive. A woman who knows and likes you is coming closer to you. She is attracted to you emotionally and physically. Lots of people here would give their eyeteeth to have your problem!
She knows you are trans and knows a lot about your history. So she already knows in advance that this is going to be different from sex with a cis-man or a cis-woman. But she's still interested. So obviously, she's pretty open-minded. Take advantage of that: I would suggest further openness with her as you get closer to the time. Tell her about your feelings and fears and find out about hers.
M to F folks often get estranged from their own sexuality during the transition process, and it makes sense that this happens. We feel dissatisfied with our "original manufacturer's equipment." HRT undermines the usual process of sexual excitement and erection at the core of male sexual performance. (I'm guessing that your concern about whether you will be "functional" refers to erection and ability to penetrate a partner.) But as many have observed, the main human sex organ is the mind.
Over the course of transition, you may have gotten out of the habit of sexual exploration and play. Here's my prescription: set aside an afternoon or evening just to yourself with no interruptions. Have a glass of wine (or maybe two) and just spend a couple of hours daydreaming and exploring your thoughts and feelings sexually. And explore yourself physically, too.
Whether or not you have erections, I'm sure there still pleasurable feelings in your genitals. What feels good when you touch yourself? (Try the perineum!) Can you still experience orgasm even without erection? (Some folks do!) New feelings in your breasts? Lips? Some other body part? (I don't know about you, but a lover kissing or gently touching the back of my neck or the area just behind the ear sends shivers down my spine!)
So take some time to explore those feelings for yourself. They're going to be your new repertoire for lovemaking. You'll need to understand them yourself so you can show a lover how to give you the pleasure you deserve.
And learn all you can about what SHE likes and wants. If you get lost and confused about your own feelings for a while when you're with her, then you can just shift over and make it all about HER for a while. The pleasure you give in sex is just as important as the pleasure you receive.
You've worked hard at your transition, mastering many different aspects of female experience. Be happy, because you are now entering one of the most rewarding parts of transition. You'll have the opportunity to make love as the woman you are. Keep everything in the open with her. Keep your sense of humor. And enjoy the hell out this as it unfolds!
