Here's a good recent news article:

http://www.womensenews.org/article.cfm/dyn/aid/3577/context/archive

Transgender Rights Run Into Bathroom Politics
Run Date: 04/28/08
By Shanelle MatthewsWeNews correspondent
A county ordinance in Maryland that protects transgender rights is facing a public referendum challenge in November. One transgender advocate says it looks like a test case for national opposition to the antidiscrimination push.

This article brings transgender cases more into the open, and discusses what may be considered appropriate public restroom use.
I think the concern for safety is valid. But if people are using restrooms appropriately, does it matter what body parts are under the clothes, or inside the stalls? How does one really know, or should people really know?