Persona 4 hit me at a very specific time in both my life and the world that I think led me to some very generous readings of the character storylines. I played it shortly out of high school in like 2009 and was dealing with a lot of orientation and gender questions of my own. At that time in the US (midwest at least) portrayals and expectations of homosexual men were not much better than the bathhouse stuff in Kanji's dungeon. As an AMAB person in that time period who was firmly denying and rejecting my attraction to men, I related really closely to how Kanji felt and what he was going thru. Mentally struggling thru the culturally ingrained homophobia growing up in that time (I remember distinctively thinking as a younger teen "I can't be Gay, I don't speak with a lisp, love the color pink, or have a limp wrist") felt fairly similar to the more japanese example of muscly bathouse guys that Kanji's unconscious projects into his dungeon.
From that viewpoint and processing the dungeons as manifestations of the character's own perceptions instilled by the large cultural collective unconscious ( a big persona theme with its shadow worlds) I think its possible to not read that dungeon as malicious. This also takes into account that Shadows selves are not bad, just something the person wants to reject (No one could really argue that Yukiko feeling trapped is portrayed as evil / bad and I think that is one of the main themes of the game)
Even with generous readings - I do think Naoto's dungeon being mad scientist themed was a fumble that the writers didn't consider the implication of. The vibe I think (hope) they were going with would have worked better with a magic / wizard theme. My own gender thoughts at the time would often turn to "I wish I could cast some spell or push a button and be able look how I want and have everyone treat me as if I've always been that way" - I can see a CIS person taking that mindset they may heard of and clumsily applying Naoto's more analytical mind to make the mad scientist surgery theme.
Even so, both characters facing parts of them they didn't want to acknowledge and embracing them as part of who they are did help me to finally break past my own denial that I feel like was much more common in the era it was released.
THAT BEING SAID, I am aware this is the most generous reading possible and later Atlus properties like P5's portrayal of "real world" (not metaverse zietgiest construct) LGBTQ characters have informed me these readings are almost certainly incorrect but I hope it at least answers the question of how some people can have fond memories or even felt like the game helped them come to terms with their own orientation and gender identity.
Oh yeah, it absolutely sucks that you can't tell Yosuke to shut the fuck up. While that shitty treatment is fairly accurate to how my high school was at the time towards the one out kid, it doesn't at all excuse the party, who are all growing into better people by the game's logic, being consistently terrible towards him.