So God created adam in God's own image. In the image of God, God created them. Male and female God created them. (The Hebrew "adam" has multiple meanings: humanity, male, and the proper name, "Adam.")
Scripture presents gender as a binary condition, not a shifting continuum from male to female. When God created man in his image, the Bible says, "male and female He created them" (http://www.cbmw.org/Blog/Posts/Male-and-Female-He-Created-Athletes-Is-There-a-Difference)
It's hard to motivate myself to write about this because it's so ridiculous. I'll expand on it later. The text says, "male and female" not "male or female." If it were the latter, gender defenders would be right. If the Bible did wish to condemn transgenderism, this would be the perfect place and way to do it and only involves a difference of a single word. I believe this subtle differences is the Holy Spirit being very careful and even affirming transgenderism. To say humanity is "male and female" means humanity has characteristics of both. "Male or female" would mean God created some people male and some people female. It neither denies nor (explicitly) affirms that some individuals are both. (You could argue this verse denies that some people are neither male nor female, but that's another issue and very few trans people identify that way.)
For those still not realizing the difference between and and or, consider a comparison. If I told you my high school had students who are black and white, you would think it obvious that I mean my school is integrated. If you went to my school and saw someone who identifies as bi-racial , you would not say I was wrong in my description. You certainly would not say this student is deceived and is "really" only black or white but not both nor would you say their parents were wrong to mix races. You accept as obvious that "and" means there is a mixture of both. The exact nature of the mixture isn't specified. If Christians were to interpret every case of "and" as "or," we'd have some horrible beliefs. We'd believe the Gospel is open for Jews and Gentiles but not Samaritans (who are both) and for the rich and the poor, but not the middle class.
In the Babylonian Talmud, we see the ancient Jewish scholars acknowledged this verse was not a denial of a person being both. In fact, they believe Genesis indicated that not only was humanity at large "male and female" but the first human (adam) was too. They believed Adam had two sides, a male side and a female side. Both existed together in harmony. When God creates Eve, God is actually splitting Adam in two. When Genesis says God took one of Adams sides (which is often mistranslated into the infamous "rib"), God is removing the female side.
I have heard the verse interpreted referring only to Adam and Eve and not the sexuality of anyone else. This is a very literal interpretation in a very non-literal chapter and only makes sense if you interprete the Bible extremely literally. It would be tempting for some to use this interpretation because it solves the problem so quickly, but it is completely unsupportable given the vast symbolism in the Bible, especially this chapter.
EV Alliance on Scripture - I evaluate the Alliance's use of Gen 1:27