Yes, they are derogatory, and also, for some people (clearly not you) can be hot to say in bed. I already went ahead and tagged it.
And I feel like I do a pretty good job addressing that Hazel is a boy who likes to dress and act feminine and enjoyed the fact that the player didn't realize. He didn't rejoice, but he certainly enjoyed it. No one has had a problem in the year and a half the game has been out. I can reread it and try to make it more clear I guess?
If Hazel was supposed to be a trans girl, I would say "This is a trans girl" like when a trans character shows up later they say "I'm a trans guy, is that cool with you?" so deciding that Hazel is a derogatory portrayal of a trans girl is kind of on you, and you are free to have that interpretation, but he isn't. He is a guy.