Jessica at Jezebel says no:
The testing was originally instituted in the 60s because communist countries were accused of trying to pass men off as women in order to dominate the Olympics, but as the website Feministe points out, "Note how Soundarajan is not identified as a male [in the New York Times]. The article uses feminine pronouns, for goodness' sake. Her only crime was being intersexed, having one of those genetic abnormalities that can cause the test to yield false results. In fact, it doesn't appear that there are any cases of this kind of screening revealing men cheating by pretending to be women at this level of competition at all."
Another reason this testing is fishy: the Olympic organizers aren't testing men for genetic abnormalities. Men with Klinefelter syndrome have two X chromosomes and Y, so are genetically more similar to women than the average man. Since scientists have already proved that these genetic differences give athletes no advantage, is there any way to call this situation anything other than outright discrimination?
This doesn't seem obviously unfair to me. Women and men compete in different classes because if they didn't, there wouldn't be any female athletes at high levels. Testosterone is crazy that way. So there's no reason to worry that men with an extra X chromosome have an unfair advantage in their sport. Call me when men start competing in rhythmic gymnastics.
That said, some of the conditions, like complete androgen insensitivity syndrome, convey no advantage on female athletes, as far as I know. There's no reason that women should be bounced from the olympics for this. On the other hand, the woman pictured on Jezebel has some fairly masculine features, which suggest that she's getting a testosterone boost.