I BELIEVE they are sent to the prison which corresponds to their actual genotype, and then isolated for their own protection. I don’t think lunacy has taken over the corrections system...(yet;)
You are correct, they are put in a prison which conforms to their actual gender, and then often end up in protective segregation. They usually are put in “seg” not because of their appearance (most prisons do not allow prisoners to simulate the appearance of the other sex for obvious reasons) but because they quite often become sexually promiscuous. This has both custody/security concerns as well as health concerns. Speaking anecdotally, most of the ones I’ve had to deal with are a real headache and end up in long term isolation because they simply refuse to be managed within the prison environment.
CC