There's no crossover in testosterone - the lower male levels are still 4-5 times higher than female levels so no crossover. Of course testosterone alone isn't a good indicator but testosterone plus other differences the male body has to the female body make a big difference.
The limit they are set at is still more than twice the highest normal female level, so more than fair to athletes with DSDs. "The regulations will be restricted to women with DSD having normal androgen receptor function and not to athletes with any type of hyperandrogenism. Only women with DSD, adrenal or ovarian tumors, or doped athletes can have circulating testosterone in the male range"* Its not mere hyperandrogenism, like PCOS (which is overrepresented in female athletes, like you said) but those with such high levels of testosterone that they either have testes, or a tumour (and tumour is probably quite unlikely as I doubt they'd be in sporting condition with tumours). And the difference isn't 3%, its more than 9% which is a big difference in elite sports.
We don't disqualify Phelps for making less lactic acid because that does not have a big impact - sex is the biggest difference in athletic ability, that's why they separate males and females. We all know that, you can see the difference in children as young as 6 if you go to a school sports day, and once puberty hits that difference becomes unfair.
*Source:
https://academic.oup.com/jcem/article/104/2/503/5114458