I suspect that one of the reasons this question has been downvoted is the attitude that appears to belittle the concerns raised in the recent FAQ. ("Storm in a teacup" implies overreaction, i.e., that those who are legitimately upset about the FAQ are going overboard.) I would strongly recommend that the question be reworded to avoid belittling those with concerns.
I am someone who has been active on SE for many years (and has contributed many, many hours of my time), but I knew nothing about this situation until I clicked on a link to the new FAQ when it came out and was profoundly disturbed. I knew nothing of Monica at the time, but the more I read, the more disturbing things became. I joined the Meta community for the first time because I wanted to give feedback on this issue.
To be clear, I am a very strong advocate in real life for acceptance of everyone. I never knowingly or deliberately refer to people by pronouns they do not prefer. However, there are still serious concerns raised by the FAQ's wording, as well as the fact that (if Monica's and other mods' account are to be believed) merely asking questions and trying to obtain some clarification about it resulted in the summary dismissal of a moderator.
There have been some recent edits to the FAQ question that appear to clarify some items based on what staff has said in comments, but the general attitude seems to be to push through a set of guidelines will little community input on the details. I am heartened by some of the clarifications that have been made in recent hours, but many of the fundamental wording problems remain. I suspect that they remain partly because to remove or reword those statements in the FAQ would undermine SE's position in firing Monica.
The trans community has been treated poorly in the past by some people on SE. It is therefore incumbent on the management of SE to get things right in setting appropriate guidelines on inclusive language and pronoun use. Instead, they have created a debacle that has alienated many users and inflamed tensions that likely have made SE a less welcoming space for trans folks and others in the short run. This is NOT a small matter. It most certainly is NOT a "storm in a teacup," and I think many people who have these concerns could be insulted by such a characterization.
The fact that we still have a few dozen moderators who have resigned and/or are taking actions like temporarily reducing activity is also not a small matter. I have no doubt that some mods have reasons beyond the release of the FAQ for their actions, but that doesn't mean that the continued existence of poor wording in the FAQ is irrelevant or merely a minor concern. I myself have refrained from downvoting the FAQ, hoping that the community's concerns will be appropriately addressed and the problematic language changed. I grow less hopeful about that with each passing day, and if things have not changed by the end of the week, I shall have to seriously consider leaving SE.
We (at least non-moderators) are not privy to all the facts. But what I do know is that a moderator of this site claims to have been apparently fired and defamed in the press for merely questioning some of the wording in the FAQ. How am I to know that I, as a user of SE, will not be similarly defamed if I unintentionally run afoul of the new guidelines? I tend to avoid all pronoun use in responding to most questions, simply because I realized years ago that it's impossible to tell gender for most users here, and I prefer to reword things just to use "OP" or the name of the user. I don't have objection to singular "they," but at times it can create confusion about a singular vs. plural grammatical structure, where again I would tend to reword a sentence simply to avoid pronouns.
So far, some of the mods in the threads on the FAQ have implied that such behavior is not against the CoC, but I need to hear that from SE, very clearly. I need to see that the FAQ is reworded to avoid clauses that could lead to my defamation in the press and revocation of privileges simply for behaving in a manner that Monica claims she was asking about.
There have been some users that have suggested that Monica's account is incomplete or has some misunderstandings; I need SE to address that publicly and release details if they want to justify what may in fact be libel again a moderator. I also need to have confidence that SE is serious about dealing with discrimination and addressing issues in a way that doesn't actually inflame tensions and then ignores them hoping they will just go away. Without such actions and explanations, as I said, I will seriously need to reevaluate my continued presence on this site.