I'm all for LGBTQ+ rights and I get that in the real world this sometimes means being uncompromising. Fighting for equality is complex.
Here's what went down.
The mod made statements that vaguely pattern match as onerous hair splitting in order to undermine LGBTQ+ rights. They did this in a private setting and there was absolutely no history that would imply they were trying to push an ulterior motive.
The SO representative identifies strongly as a defender of LGBTQ+ rights and viewed this as "definitely this person doesn't think LGPTQ+ people should have rights" and de-modded them.
SO made the initial choice to circle the wagons and back up one of their own and then got stuck hard on that path for months even when it became clear they'd made a mistake. It's a problem with management and it's not going to be solved without changes in management. A sorry would have sufficed if it had come many months ago. The SO rep just needed to admit to being human and making a bad call.
(P.S. this whole row was over the style in which I've written this post, the new code of conduct would have me use gender specific pronouns if the preferred pronouns of the subjects are known and using a genderless style of writing would be against it)