I mean what else to do with transgender people when you decide to eliminate transgenderism in its entirety?
Nothing. You do nothing. You're trying to interpret his words from a perspective of gender as an immutable characteristic and transgender as one particular configuration of that. But that isn't his perspective, he sees the whole thing as a misconception. Imagine the following conversation:
Person A: We need to remove from society the idea that tomatoes are a vegetable!
Person B: You want to get rid of tomatoes?
Person A: No, I just want to acknowledge that they're a fruit.
Person B: So what are you gonna do with the tomatoes then?
That's what this conversation looks like from his perspective.
So transgender people can exist so long as they aren't transgender.
Close. The idea is not "transgender people can exist'", it is "the people who say they are transgender do exist, but they aren't transgender." If Michael Knowles personally murdered every single individual he believed to be transgender, he would kill zero people.