I think that tranny/transvestite are generally improper. The equivalent of fa*got or homo for gay people. However, it depends on the context. For some reason, it is common for a minority to call oneself by a generally negative term. Like the N word for blacks, hag for gays, and yeah, sometimes transgender people will call themselves trannies; this same type of behavior can sometimes be extended to close friends of minorities who obviously do not intend for the negative connotations. So I think it's more of the connotation to the word in its context, rather than the word itself in most cases.