How to respond he/she?

I was taught not to lie.

It's about being abusive, not disrespectful.

After my mum remarried (50 years or so back) certain people refused to call her by her new surname. Some wouldn't speak to her at all, and one born-again Christian mum of one of my friends told me she'd burn in hell for being divorced. I'll let you imagine how they treated a local lesbian couple who had kids.

Abusing people is always a choice, however you choose to excuse it.

I'd suggest you take some time to get to know your friend's friend, and realise they're a perfectly normal person who happens to be trans. Once you get to know them, you'll find it second-nature to use her name and pronouns, because you'll see her as a person. you

This really is your problem, not hers. It's worth trying to overcome it for your own sake.

I'd have been polite, respectful and used her name.

It's really not difficult to be a decent person and not abuse strangers in public.

If it keeps the peace just say she.

I mean years back i was oh ffs not all this crap again, now im kinda you know what it just words.
If you want me to call you she, he , fox or toad just tell me and it will its easier.
I dont have a problem with any of it.

Try to avoid saying the pronouns as much as possible if you can, or even don't talk about him if it's uncomfortable for you. It definitely messes with me to refer to the trans identified man I know as "she" but I try to make it so I am using pronouns as little as possible. Often times without thinking I'll simply call this person "they" tbh, as if my mind can't pick which side to go on.

It's very much a mind fuck but because of the context in which I interact with this person, I do not bring up my views.

If you do want to fight about it, do it very softly, as if you are just curious just by asking a few questions rather than stating your position.

Other people are free to hold views you disagree with, given that you are also free to hold views they wouldn’t agree with. That’s the idea of living in a relatively free and still fairly tolerant society. A social night out with people you’ve just met is not really the place to start a debate about gender ideology, unless it’s clear that’s a topic of conversation that everyone is happy with and can discuss without getting upset.

What toilets did he use?

It's not your job to control how others choose to refer to someone. Why did you even ask, if not to be goady?

I’d probably make excuses and leave tbh. Or stay and be in the group but as far away as possible from him. I’m rubbish at telling lies and being fake or tolerating anyone being fake. I couldn’t cope hearing people encourage this sort of thing.

It's not really up to you to dictate how others want to refer to people. You don't have to use she yourself if you don't want to but others are allowed to. They don't need your approval.

You don’t have to use “she” for a man, and if it might cause conflict to use “he” then you could just use his name. I wouldn’t have asked the question as it’s obvious what the answer is, that they think it’s the right thing to do to appease this man. Which is their choice, but not one that everyone has to conform to.

Was this person out with you in the group?