This post from the National Catholic Bioethics Center explains the problems with gender reassignment pretty well. It explains the Catholic view is that gender is fundamentally a part of a human being's identity, and is bound up with both body and mind, not residing only in one.
Properly understood, a person cannot change his or her sexual identity. For persons not suffering [from hermaphroditism] a person is either male or female. A person is the unity of soul and body, and ‘soul’ should be understood not as an immaterial self, but as that which makes the body be what it is, namely, a human person. We are either male or female persons, and nothing can change that. A person can mutilate his or her genitals, but cannot change his or her sex. Changing one’s sex is fundamentally impossible; these procedures are fundamentally acts of mutilation.
Because of this rootedness of sexual identity in the whole person one cannot actually change ones sex.
A person can change what genitalia they have, but not one’s sex. Receiving hormones of the opposite sex and removing genitalia are not sufficient to change one’s sex. Sexual identity is not reducible to hormonal levels or genitalia but is an objective fact rooted in the specific nature of the person.
To accept the validity of a sex change operation one must believe that sexual identity is rooted only in the mind, and not the body. This is at variance with Catholic beliefs.
Those who hold this position assume a dualism between mind and body. Properly understood, persons are either male or female. The body (of the person) is a fundamental indication of what sex we belong to. It is a physical, empirically verifiable reality that does not change simply because our beliefs or desires do. Once the dualism behind the question is rejected, and one recognizes that our sex is indicated by our bodies, we can see that sexual identity is an objective, readily discernible fact about us.
Finally, if there is no reason for the change driven by sexual identity, then the medical procedure becomes an act of mutilation.
Changing one’s sex is fundamentally impossible; these procedures are fundamentally acts of mutilation. Mutilation results in a person being rendered impotent or sterile and dependent for the rest of one’s life on a hormonal regimen which makes one appear to be other than what he or she is. There is nothing wrong with the genitalia of persons seeking such operations. But they are removed in order to conform to the person’s subjective belief about who he or she wants to be. Doing violence to one’s body when there is nothing wrong with it is an unjustifiable mutilation.
Finally, to answer the question about whether the Catholic church should accept 'current medical practice' as correct, 'current medical practice' is as often based on philosophy and sociology as it is on science. Medical approaches to homosexuality, abortion and mental illness have all changed very significantly in the last fifty years, and those changes have been driven at least as much by changes in societal beliefs as they are by medical science.
EDIT: The article also goes on to address the issue of whether this stance gives undue weight to the body over the mind. The argument goes that if a person believes in their mind that they are one sex, while their body indicates otherwise, is it not giving undue precedence to the physical to insist that the body's sex is paramount? The response to this is that a person may have false beliefs about themselves in their mind (not just about sex but about other things), whereas the body cannot give a false indication of sex (except in very rare cases, where surgery is permitted).
