Hi Robin, I ran into a similar situation at a gas station this past December, except there was no other associate and just like in your story the clerk either couldn’t get his mind around it or else just didnt want to. So I took my business elsewhere and continue to do so.
My license is several years old and looks quite a bit different from how I usually look now. When it comes up for renewal next year, I’ve thought about showing up at the bmv in fem, but that might present another set of problems…? The bmv here was set to begin issuing “non binary” licenses but apparently our state attorney general (who has plenty of problems of his own) doesn’t like that, and our state legislature doesn’t seem to either.
As far as the police tho…it hasn’t been an issue…at least not in two instances of talking to state police officers… I can’t comment on how small town would respond but the state police have been good to me.
Having said all that… I think the whole issue of licenses, name changes & gender markers etc is a huge and ridiculous problem for the community…