As someone who is a Morph fan (he was one of my favorite characters when I watched the series as a kid, and I enjoyed him in AoA/Exiles as well), it is wild to me that so many people apparently care so much about a character who I always thought had a fairly small fanbase.
I don't really agree with the arguments of "just make a new character, don't change an existing one," because how much do we REALLY know about TAS Morph? When and how did he join the team? How long was he there before his "death"? (Long enough to get to know everyone and form a strong friendship with Wolverine, at least, but beyond that, we don't know.) Why are he and Wolverine such good buddies, anyway, what's their history? What's his sexuality? We know he generally presented as male and used male pronouns on the show, but was he totally comfortable with that? We don't know. Morph was in the show for all of nine episodes (11 if we count nonspeaking cameos), and apparently the character is set in stone and can't change in any way? He can't reconsider his gender or come out the way many trans people do?
I'm sure they are partially basing Morph's characterization now on Exiles Morph, hence the new look (which is funny, since I'm pretty sure it was influence from TAS Morph that turned Changeling into AoA Morph in the first place). And it's true that Exiles Morph identified as male and always seemed completely comfortable with that. But he and TAS Morph aren't the exact same character. Exiles Morph was a New Mutant, and X-Man and an Avenger, and never had the kind of trauma that TAS Morph through (maybe the Proteus possession would sort of count?). They are basically AU variants of the same person, I see no reason why one of them can't be nonbinary. Adaptations change things all the time. If it's so important for TAS Morph to be exactly like his comics counterpart, shouldn't we all be angry that he's not a long-dead, redeemed 60's villain with terrible fashion sense?
I can honestly imagine various reasons for the nonbinary thing. Exiles Morph was born as a vaguely baby-shaped blob, and took on human form to fit in. Maybe it was the same for TAS Morph? Maybe Exiles Morph was completely happy in male form, but TAS Morph was never totally comfortable having to choose just one gender, and only stuck with male because it was the "default" human form that he used growing up. Maybe after everything he went through, and all the time on Muir Island recovering, Morph started to reconsider things about himself, and one of those things was "Actually, I don't think I'm really a man, and I'm not going to hide that anymore." That's just complete speculation on my part, I have no idea how the show will handle it.
On another note, I would totally love Exiles Morph and TAS Morph to meet at some point, so Exiles Morph could teach him some advanced shape-shifting tricks. "Bro, did you know we can get ripped in half and shape-shift back together?"
I'm not trying to speak for all Morph fans, obviously there are some people here that like the character and don't like the change, and that's cool. Personally, I don't see it as some kind of massive re-imagining of the character. If nonbinary Morph is still the team comedian who is close with Wolverine and who is maybe a little more serious after all the crap he went through, I'm good with it.