It's a Wild West where magic and steam punkish technology works. Dead Reckoning http://www.mercedeslackey.com/books/dead.html. While not truly TG, one of the three main characters is young woman looking for her missing brother, she is traveling the west disguised as a young male gunslinger. The protagonists use magic, science, to fight off a hoard of zombies.

It is implied that there will be a sequel, but it's been two years. );

Is there is a quintessential TG-themed fantasy story/novel that I should absolutely read? Is there a reason why there are so few? I would think that this site would be full of them, but there are good reasons (I believe) that they are not abundant.

If you want to write a story that focuses on a character's transformation, how it impacts their life, the personal conflicts, and how they interact with the world, it does not really make sense to place it in a fantasy world. Maybe an enhanced earth, which allows the transformation by magic or tech, but you are mostly dealing with how you expect or want people to react. Beyond that, there are lots of other interesting genres, set on a real earth, in which you can introduce a TG character. In general, I don't think the fantasy section is that much smaller here than in a book store.

1) It is hard to write fantasy and even harder to write good fantasy

I think this is true of all genres.

2) It requires creating not only characters, but villains (loathsome creatures), the world with all of its geography, politics and religion. Setting a story on Earth is far easier.

Personally, I find it much easier to create a story in a world other than earth. I can't do what I want to do on earth, I need to be the "god" of my own world, be able to manufacture the rules of the environment. In fact, I feel that the biggest fantasy world I see here is realty, I find myself to cynical to ignore certain rules and create the story I want to create. Better to create my own reality. It also seems that real world conflict leads to more emotional trauma, I would rather balance that with the potential for some physical trauma.

As for geography, it's fun to draw a map and a key early step to world building. With politics and religions, it is not a matter of inventing new types that have never been seen, but moulding and combining the variations available in history books into the model you want. I also do not think your villain need to be loathsome or epic for fantasy.

3) It is very easy to fall into tropes (elves, goblins, dwarves)

I hate high fantasy elves. Think they are too stuck up, magical and yet useless for their own good.

That said, fantasy does not need fantastical creatures, just fantastical elements. Not saying you should not use them, they can be fun and introduce a whole section of world building without writing thousands of words. It's just that they are not really needed.

As for tropes, I think a writer needs to be careful ignoring or writing against them. The whole asshole, anti-hero (who is maybe slightly better than all the other shit heads in a world) started as a repudiation of a trope believed to exist, yet has become the most prevalent trope in today's fantasy writing.