The hadith is classed as weak by Zubair Ali Zai whose grading is presented by Darussalam in its publication and which is copied on sunnah.com. It is also classed as weak by al-Albani.
The meaning is that if a person verbally abuses a Muslim by calling him a 'Jew' or 'Effeminate' (when he is not so in reality) then this is a punishable offense. Further it states that if a person marries or has intercourse with his mahram then he is to be executed.
The meaning of the hadith is correct in general terms. As for first part it is punishment for insult and defamation and it is agreed upon that a ta'zir applies on it as there is a ta'zir for every act of disobedience to Allah.
واتفق الفقهاء على أنه يعزر بقوله: يا كافر يا... يا مخنث ... لارتكابه معصية لا حد فيها، وكل معصية لا حد فيها فيها التعزير
The jurists are ageed that there is a ta'zir on saying 'O disbeliever ... 'O Effeminate' ... as it is commission of a sin for which there is no hadd, and every sin for which there is no hadd there is a ta'zir
— Mawsoo’ah al-Fiqhiyyah
The nature and amount of punishment in a Ta'zir is not fixed rather it is left to the discretion of the ruler or judge to enforce what he feels will be appropriate on a case by case basis. If the mode is lashes then there are different views on the maximum limit of lashes which can be enforced as a Ta'zir.
As for killing one who marries or fornicates with his mahram, then this is also corroborated by other hadith such as these two:
بعثني رسول الله صلى الله عليه وسلم إلى رجل نكح امرأة أبيه فأمرني أن أضرب عنقه وآخذ ماله
The Messenger of Allah (ﷺ) has sent me to a man who has married his father's wife. He has ordered me to cut off his head and take his property.
— Abu Dawud
من وقع على ذات محرم فاقتلوه
Whoever has intercourse with a Mahram relative, kill him
— Ibn Majah
The ruling however is disagreed upon: Execution applies by consensus if the culprit does it because of considering it to be lawful because that would be apostasy which gets by punished by execution. However if it is done due to temptation without disbelief then the majority punish it with the Hadd of Zina (lashes for the virgin, stoning for the non-virgin), while a minority punish it with execution regardless.