Their jokes about assigning gender to babies and to being transgender, dressing in drag, like all of it was a send-up.
Sure, they did punch down if you were a person who were in those groups, but the fact that it was large enough social event to be relevant enough to be a comedy skit on a television show or a movie seen by millions implies that there were some serious things going on back then that they could see and wanted to address.
What the hell was going on that put all of those things in their mind?
The difference between movies then and now is that back then being gay, transgender, or wearing clothes not befitting your birth sex in general was always paid as a joke. Haha, everyone point at the man in the dress and laugh. These days media is starting to accept that sometimes someone born with a penis actually likes wearing a dress, and not just as a sex thing or a comedy bit.
Drag is kind of an outlier, but as far as I know that never had much of a mainstream appeal in most places. I think the exaggeration helps acceptance a bit, for close-minded people the excess can be interpreted as “someone putting on an act like in a play” rather than “someone wants to be something which my small world view cannot comprehend”.
On the other hand, feminist empowerment made it pretty normal for women to wear suits many decades ago, despite the weirdoes disgusted by the idea of women wearing suits. These days, only dresses and skirts are treated weirdly by western media (unless they’re Scottish skirts, of course, those are fine for Scottish men to wear because they get a special name).