In what way is it impractical. It's quite simple actually.
Hugely! Good grief!
Let's say Tom was a drink driver and is in prison for the next two years. Tom can't afford a full surgery. From female to male is essentially double or more the amount of male to female. He is tall, muscled, prominent Adam's Apple, the whole package - except he has a vagina. So, Tom goes to a woman's prison. They can't reverse the effects of the hormones, so Tom looks how he looks. Is the government going to fund his surgery so he can transfer? If Tom takes consistent hormones, will they supply them? Is his binder wearing out? Will they provide a new one for him?
Women who now have a phobia of men are expected to shower and sleep in the same room as Tom. Funnily enough, the thought "he has a vagina" doesn't comfort them. The prison now has to try and fund new bed/bathrooms for Tom, but now some other prisoners are complaining that he gets private facilities. Some might begin saying they are trans to use private rooms.
Then we have - I don't know, Sabrina. Sabrina has a penis but has been using female pronouns since she was four. She looks like a conventionally attractive woman. As a trans woman she has is highly likely to be sexually harassed. This only becomes higher in a prison. How do you ensure nothing happens to Sabrina in a male prison?
Sabrina hates the idea of male pronouns and her birth name. Some prison wardens think it would make her safer, as would making an effort to look "like a man". Sabrina knows this would make her extremely dysphoric, and they don't want to risk that as Sabrina has anxiety and depression and a history of attempted suicide. However, she is very much at risk in the prison, as well as being isolated and seen as an easy target.
Sabrina has a blood condition which makes surgery unsafe, so there is no hope of transfer for her. Now she has to choose between her mental health and her safety, possibly for a very long period of time.
I don't know why I did this in weird examples of two make believe people, but you get the gist. It's super complicated.