Hmm... this makes me uncomfortable, and although I don't think it's internalized phobia or anything like that, I want to interrogate that discomfort to see if I can nail it down.

I do think it's difficult or maybe impossible to decouple this practice from indications of power for most people. The only instances of capitalized pronouns in common use that I've seen are the God and Jesus usage, and in some circles, capitalizing pronouns for a dominant in a role play context. "I" getting capitalized is also there, kind of, but that's not a power thing because it's not special, everyone is expected to use it as a language rule. I've also seen things like "oh, sure, that's what They want you to think" or, not quite a pronoun, something like "they want you to fear The Other," maybe less of a power thing but definitely a signal of additional weight and meaning above and beyond the word's usual sense.

I think this is the main source of my discomfort, that this practice is currently used almost exclusively at least as "this word is being used in a special and important context, pay extra attention" and going as far as "I am explicitly signaling that the person being referred to is superior." I don't use He/Him pronouns for God or Jesus because I don't belong to those religions and don't see those entities that way, and I have a fundamental belief in the equality of all humans that makes me uncomfortable putting a person on a pedestal like that.

I feel uncomfortable about it/its pronouns as well for the same reason, I don't like the idea of dehumanizing or objectifying a person, but in that case I actually have some friends who use them. It's easier to take a "well, if it makes you happy, it's no harm to me" attitude if it's asking for a "demotion" so to speak, I think. The personal connection probably does help too, I don't know anyone who wants capitalized pronouns myself.

I've seen Dan Savage use capital pronouns to refer to dominants when answering letters, but that seems to me like Dan stepping into the letter writer's scene space and choosing to go along with the "rule" while he's there giving advice, kind of a "good houseguest" thing. I don't think that's something that the rest of us are obligated to do as a rule. I'd push back on a friend insisting that I refer to their dominant with capitalized pronouns, because whatever their relationship is with each other, their dom isn't my dom, and I didn't agree to that hierarchy, they did.

I think the other discomfort is more of a language and grammar thing, which obviously is less important than an actual person's comfort (see also, the old "they is always plural" chestnut) so I'm not going to assert that this is a reason to disregard a person's wishes, and language rules are subject to change. But in general capitalization is not all that significant in English, which we know because something written in all caps or in all lower case usually has no meaning removed. Words at the start of sentences, proper nouns, and "I" get capitalized, and that's mostly it. It's mostly about readability, because ALL CAPS DOESN'T HAVE AS MUCH CONTRAST but when used sparingly as we usually do, important words stand out with a capital letter. "Demanding" that a particular word be used to refer to yourself in the form of pronouns is in the same ballpark as choosing your own name, obviously completely reasonable and acceptable, but "demanding" that special language rules be used about yourself feels a step beyond that. I don't want to cross into "oh so could you identify as an attack helicopter too" territory, but I do wonder about some of the boundaries on this. Lots of people habitually write in all lowercase, would it be disrespectful to say "oh yeah i saw larry at the empire state building and had a conversation with him" if Larry uses He/Him pronouns? Would Larry be upset about both the name and pronouns, or just the pronouns? I don't think most people would get up in arms about their proper name getting de-capitalized in that context which seems like further evidence that capitalization isn't normally a meaningful aspect of the writing, it's a more mechanical and practical rule, so insisting that for certain people it does need to be made significant feels like more of an imposition to me, and comes right back to the "you need to treat Me as special and more important" feeling that I have.