I've always felt that gender identity flows outward rather than inward. What then happens is we receive feedback from others, and that colors our perceptions of what we think we're supposed to feel, and that can cause confusion if we experience negative feedback. The confusion, however, is not over what we feel, but what we're told we have to feel, which of course ends up in causing mental and emotional stress. It's that same feeling when one is told their orientation is wrong, or immoral. Inside, it feels fine, everything feels natural, but the feedback from the social order causes conflict, which causes confusion.
TL;DR - People know how they feel, how they perceive the world, and what they desire. It's only when people stick their noses in other people's business that it results in the pain and frustration we see.