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This is a rush transcript from "The O'Reilly Factor," February 28, 2008. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: In the week in review, from the "Ingraham Angle" segment tonight, transgendered kids and prisoners. In Douglas County, Colorado, outside of Denver, there is a second grade boy who wants to dress up like a girl at school. Authorities say OK. And in Massachusetts, there's a prisoner racking up big money gender treatments at the taxpayers' expense.

Joining us now from Washington, radio talk show star and FOX News contributor Laura Ingraham.

Video: Watch O'Reilly's interview

All right, let's take this kid out in Colorado. We can't identify the kid. I mean, obviously, you don't want to do that, all of that. You're -- not even his family.

But if you're his mom, and the kid comes to you, and he's gender confused at age 8, you do what?

LAURA INGRAHAM, FOX NEWS CONTRIBUTOR: Well, I think it's a very difficult situation for the parents, obviously. But, look, Bill. I think the point here is that an eight-year-old little boy or little girl should at least be able to be innocent little kids for a while. And all their classmates should be able to be as well.

And there are lots of things that I wanted to do when I was 8 years old that I wasn't allowed to do in school. I mean, I loved to chew gum in school. I liked to -- you know, I was -- you know, I didn't want to wear a certain dress. And my mother said, yes, you are wearing that dress, and put on, and get ready for school.

I mean, an 8-year-old child should not be able to dictate the norms of behavior, whether it's in a household or in a school district. And this is what I think, sadly, political correctness has gotten us in our schools.

And I was joking earlier that wouldn't it be interesting if Muslim families and the school district said, wait a second, we can't have this. We cannot have unisex bathrooms. We can't have special accommodations. This is against our value system. It would be interesting to see how the public school at that point adjust the concerns of Muslim parents versus the kids' parents.

O'REILLY: It's certainly part of the culture war. There's no doubt about it. And trans youth family advocates group -- national group says, look, this is a health issue. It's a health condition. And like any other health condition, a public school has to make an accommodation to the child. And you say?

INGRAHAM: Well, I think the idea that children at age 8 are sexual beings or we want to encourage them to be, you know, sexual beings or making decisions on life altering questions that, frankly, can affect the rest of their lives I think is ludicrous. And I don't -- I mean, I'm actually surprised the parents of this little boy aren't kind of embarrassed to, you know, put this on the school system and say, OK, all the rest of you who might not want to expose your kids to this quite yet, too bad for you, because this is what we want to do.

O'REILLY: Well, that's right. I mean, then, you know, if the little kid -- the boy comes in dressed like a girl, and then all the other kids are going, why is Larry looking like Sally?

INGRAHAM: You got to explain it.

O'REILLY: Yes. I mean, absolutely. And that's always the intrusion, but it's the balance has shifted to the intruder...

INGRAHAM: Well...

O'REILLY: The person who has the "health" condition.

INGRAHAM: Yes, I think what's happened, Bill, is that families are afraid to speak out, because they're afraid of being called intolerant...

O'REILLY: Well, absolutely, there's no question about that.

INGRAHAM: ...or, you know, and they're afraid.

O'REILLY: They can't even speak out about illegal aliens, or you know...

INGRAHAM: Well...

O'REILLY: You know...

INGRAHAM: ...you're bashed.

O'REILLY: Now in Massachusetts, this guy, who's murdered his wife. He's in jail forever. Robert Cuselack, 58-years old, wants to be Michelle Cuselack. And he wants to the taxpayers -- there, there's Michelle. To pay for it. And I'm saying no. And -- but the dopey judges in Massachusetts might say yes, correct?

INGRAHAM: Well, this is unbelievable, Bill. This story started in 1993 when Robert changed his name to Michelle and then petitioned the court -- sued the Department of Corrections, making an eighth amendment "cruel and unusual punishment" claim, saying that he should be able to get not only gender identity therapy, but a sex change operation...

O'REILLY: Absolutely.

INGRAHAM: So Judge Mark Wolf, who was nominated by Reagan -- President Reagan in 1985, believe it or not, he didn't order the sex surgery, the change surgery. But he did order, get this, other treatments that include laser hair removal, other hormone treatments, and counseling. And now, apparently, some of the hair is growing back. Not to get too graphic here, but he wants to revisit the sex change operation.

O'REILLY: OK, so he wants -- the taxpayer to pay for it all, which is insane.

INGRAHAM: It's unbelievable.

O'REILLY: It is. It's insane. I mean, but this is Massachusetts. This is what you've got in the secular progressive state like that.

But I want to know -- see, what's coming next is that Robert, who killed his wife and is now in jail forever is going to say, well, Robert did it, but Michelle didn't do it. So let me out.

INGRAHAM: Well...

O'REILLY: That's next, Laura. You -- that's what is going on here. Robert did it, but Michelle had nothing to do with it.

INGRAHAM: Well, it is so outrageous on so many levels. And the amount of money that the Department of Corrections -- again, this money doesn't come off of the trees or out of the sky. These are, like, people working two jobs...

O'REILLY: Absolutely.

INGRAHAM: ...you know, earning money the hard way.

O'REILLY: Massachusetts, you bet.

INGRAHAM: ...paying for $52,000 worth of expert testimony in this case.

O'REILLY: All right.

INGRAHAM: Bill, this is insane. And this is where judicial activism has to be exposed.

O'REILLY: Laura Ingraham, everybody.

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