I'm gonna have to go with South Park on this one. It really no longer means homosexual. At least not with adults.
We use Gay now to mean stupid...ie "That's gay." Some will argue that this is still a slight against homo's (to lazy to keep typing the full word) because you are then saying they are the same as stupid. No. It is a roundabout way of saying stupid by saying it's odd, otherwise queer, which yes was applied to homo's, but because of the words true meaning of basically odd. Not normal, or more precisely, not the norm in society. Not particularly assigning good/bad, right/wrong to it, but acknowledging it as a minority occurrence against the whole of human society.
Similarly, fag and ****** has come to mean more along the lines of "prick, dick, ass, asshole, etc." While not losing the irony that those words can be associated with male homo behavior, that is quite honestly the point. We are arriving at that meaning in the same round about way as the word gay. Yes we are using a slur, but not for the sake of insulting the original sluree?, but using the connection to reach another meaning.
Basically its the linguistic equivalent of 6 degrees of Kevin Bacon. Is this stupid? Probably. But it is what it is. It's in it's own way similar, yet different to black people taking the original slur of ****** and changing it to nigga for use to try to remove the awful connotations of the past. But in this case, instead of the targeted group reclaiming the slur for their own use, basically everyone else is doing it.
Is there still homophobia in our day and age? Yes...racism too. But lets be frank, it's really the preceding generations that happen to still be in power that hold those views. Most in my generation, say maybe 1970ish and up are far more tolerant and accepting of people then our elders were. I work and have been friends with people of all kinds, white, black, asian, indian, etc., straight and gay of both genders. You know what these people are to me? Friends, family and co-workers first and foremost, and they all just happen to be whatever they are.
I like to think back to that movie Bulworth. Were the politician kinda goes nuts for a weekend. They had the right idea, "Everyone just needs to keep fucking everyone else till we're all the same." The trick to that is on the outside. We are all already the same on the inside...where it should count.