I support this guidance 100%. While I'm not trans, being allowed to use a nickname and dress how I chose when I was a student meant that I became a more confident and respectful adult.
I never go by my full first name, even professionally. No one questions me when I ask to be called by a shortened version nor do they question my partner who goes by a middle name. When people get married and change names, no one questions them nor their prefixes if they go from Miss to Mrs. or Ms. Even as a kid, I had friends who asked to be called by nicknames and again, no one questioned this. We dressed like weirdos but were sure to dress respectfully for more formal occasions like church and special events. Our clothing choices harmed no one. All of my weirdo friends are now middle-aged parents with desk jobs and single-family homes. We are in every way "normal". Being different as children didn't harm us for life and it meant everything that we could explore who we were in a safe way. Names and clothing can all be changed. The confidence and dignity that comes with being allowed to express yourself and be affirmed and respected for those choices makes an impression that lasts a lifetime.
Why are trans kids any different? Affirming who someone else is costs you nothing and means everything to that person whether it is calling them by a preferred name, letting them wear appropriate clothing that makes them comfortable, and/or using pronouns that reflect who they are. Seeing the joy in people who finally have their identifies validated is priceless. Schools have a duty to teach the whole child. This guidance is part of that. Please implement it.