I think he wanted a one night stand but doesn't consider you dating material because you're transgender. (in my opinion)
I wouldn't say its a compliment. More sugar-coating. And not quite of a backhand comment either.
It's like saying, "You're so handsome, but you don't make enough money to support us if we wanted a family" or "I would date you when you were in your early 20s, but after the meltdown and the crazy antics I would be too embarrass to bring you to my family".