Many times, compromise such as this is needed to move in the right direction. The thought is that half a step forward is better than no progress at all, so advocates backed down marginally to gain some footing. Establishing protections for the workplace and in housing is progress, and there is always the potential to push for protections in public accommodations at a later time.
People are incredibly fearful of any perceived loss of privacy in restrooms. We are indoctrinated from a very young age that there is a men’s room and a women’s room and that’s just how it’s supposed to be. On a base level, it is a hard thing to unlearn responses which have been trained from early in development. Backing off on this one issue, though, allows for time, the time needed for visibility of the issues to grow. Fear is the motivator of this opposition, and it can only be reduced through understanding. Visibility and knowledge are the keys to creating understanding, and we must work to provide these things to keep working towards equality.