My personal view is yes: in an ideal world, a non-patriarchial world, yes, we wouldn't feel the need to pierce our ears. Because yes, it is (as you say sassh) a form of multilation. But we do it because, well, it is a tiny sting, and a tiny hole, and thereafter typically not an issue.
To talk about this or gender reassignment surgery in terms of 'madness' (which TBH isn't the world eats used) or 'psychological treatment' might be missing the point.
My best guess is that if we lived in a world where gender was no longer our key social construct, transsexualism as people experience it now, wouldn't exist. That is a guess. I don't know. No-one can know.
The reason I mention it is, I do strongly believe that gender is a social construct that we need to get rid of. 'Gender' is all the pink-for-girls, blue-for-boys, women-can't-drive, men-can't-cook rubbish, which when you take it away, only leaves biological sex: what primary and secondary sexual characteristics does this person have? (I also believe that without gender, the stupid desire to put people in boxes and insist such-and-such a woman 'looks masculine' or such and such a man is 'feminine', would disappear).
It seems very confused (and inconsistent, and patronizing) to me that, in order to transition, many transsexuals end up 'performing' a gender identity by being hyper-feminine, or hyper-masculine. Why? If the medical establishment trusts they are capable of deciding they need surgery, it's insulting to make them perform some silly game. Or, if the medical establishment is wavering but playing around with a trumped-up test, why choose to reinforce the idea that women must be masculine and men must be feminine?
So, basically, I think 'gender' is a stupid and useless construct, and I would love to see it gone. What is instead happening is that the definition of 'woman' is being changed. 'Woman' used to mean 'a person whose genitalia led to them being identified as female at birth [nb: not 'feminine']'. This definition is useful (maybe crucial) to feminists because it gives us a group identity, and because feminism is a political ideology, we need a group identity.
Drawing the boundaries of that group isn't easy. In the past, it's been drawn to exclude people we'd now insist be included - working class women; women of colour. Some might say, why not re-draw the boundaries again and include male-to-female transwomen? It isn't an invalid question, but I still find it a worrying one. Because at the moment, transsexuality reinforces the idea that 'gender' is the most important binary (not sex, and not anything else). That's the opposite of what I'd want to do.
I know feminists and transsexuals have a huge amount of common ground, but I still end up coming back to this issue of gender and the - to me - radically different ways we see its importance.
I hope that made sense.