I'm in the "i don't care, wear what you want, clothes are clothes" camp.
..but as plenty of people have posted, men's swimwear and women's swimwear is cut differently, and a woman's one-piece would not hold a dick and balls appropriately or securely.
I wear men's swimming trunks and a vest to swim in - the trunks that are cut like cycling shorts, not baggy shorts - and so I'm no stranger to swimming while cross-dressing. But as a woman I am neither aroused by this, nor in a position to display my arousal if this were to be the case. It's reasonable for others not to want to see some man's boner. I think the lifeguards did the right thing.