I think you and others who thought the policy was a good idea are missing the key reason why it isn't.
The rule forced schools to notify parents regardless of the circumstances. It did not say that parents must not be notified under any circumstances. That's a massive difference.
As you said, this is not a cut and dry issue. If a school deems that a trans student's health and safety are in danger and that the parents should be notified, then they can make the decision to do so. However, under most circumstances, if the parents are not already aware that their child is changing their gender identity then there is a good reason for that.
These situations are highly sensitive and must be dealt with on a case-by-case basis - the policy destroyed all that and put many students in danger unnecessarily by completely removing all nuance from the situation.
You are less comfortable with schools being able to deal with sensitive situations in a nuanced manner than you are with forcing them to adopt a single, narrow, sledgehammer approach that could put many students in harm's way?
That's a rather peculiar take.