Can somebody explain it patiently to me if I'm wrong.
I think I see the intended joke.
The dude being played by the AI is transphobic, and had a transphobic bit. Nobody laughed at it because the AI said "hey, transphobia isn't funny and is morally wrong, people aren't going to be laughing at it". The transphobic dude himself was indeed actually serious and sad at the failure of his jokes.
This doesn't mean the AI itself is transphobic any more then it believes that its actually an elf when you tell it to be an elf.
Obviously its the exact type of thing that's meant to be caught by the chatgpt filters and typically just results in them refusing to do it, but the filters aren't perfect and stuff gets through.
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I can see why it was banned from twitch, because you don't really want any anti-trans stuff on any level. Even as ironic humor it can be bad because it can be used by actual anti-trans people to hide behind humor, and this is pretty easy to misinterpret especially if you don't understand the AI.
Plus, twitch probably has some dude being paid a dollar a hour in a third world country to go through like 100 reports per hour, who doesn't have the time for a nuanced moral debate and just went "well this is clearly anti-trans jokes" and hit the ban button.