I hate to see so many people disregard your embarrassment as ignorance. It's not ignorant at all.
Ignorance, noun the state or fact of being ignorant; lack of knowledge, learning, information, etc.
People who are ignorant tend to not have knowledge, and also not accept knowledge. You, however, know exactly what you're talking about. Being around someone who is the opposite of what you're trying to become is extremely embarrassing and tends to make you look bad in the eyes of others.
If you hang out with a group of 3 friends, and all of those friends are smoking weed, then it's gonna make you look very bad. Even if you're not participating, it still presents a very negative image. Your parents might get pissed at you if they see you around these people, and your "clean" friends are simply gonna stay away from you. It doesn't matter if they're your friends or not. Don't hang out with people who are presenting as something that you do not wish to identify with.
If your friend isn't putting any effort to pass, and they're presenting themselves as a "->-bleeped-<-", rather than a woman, then it's perfectly fine to feel awkward. I personally wouldn't want to hang around a person like that because that's exactly what I don't want to become. It seems that you and I both don't want to be affiliated with masculine women. That's perfectly fine. In all honestly, seeing a straight-up dude in woman's clothing is kinda gross to me.
There's nothing wrong with thinking this way and it certainly doesn't make you ignorant. It means you're a unique human-being with different views. As others suggested, maybe you should talk with your friend and try to help them pass. Otherwise just be honest and tell them how you feel about it.