1. Relatively, there wasn't a problem with it the trap character the past. Once found out, most fans would laugh and move on.
2. This happened earlier with Kate Holt/Pidge in Voltron where once the fanbase found out that Pidge was a girl, the fanbase went nuts complaining why she wasn't trans despite showing evidence contradicting that.
3. In this insane SJW mindset of these idiots complaining of "No dead gays", they would hang their hat on the concept of a dead [not] transexual child.
There is no evidence showing that Lily/Masao is trans. It's just a bittersweet story of a kid with good intentions being overworked, and later lost in the Lily role he and his father developed and fear of growing up. Basically one big Peter Pan analogy. i.e the Go Go Neverland SAGA episode title
In a comedic sense, I'd still call Lily she for two reasons
1. Contextually, the world and Japan in Zombieland Saga only knows of the Legendary Hoshikawa Lily, not Go Masao
2. It's easy. We are episode 8 of a 13 episode comedy anime. It's hard to care about semantics at this point.