Kurokami said:
wow... this was derailed early. To start: no, you're not a Nazi or "othering" people by using a collective pronoun the way it is intended. I'll actually try and answer your questions though. To declare my biases up front, I am a bisexual man in a homosexual relationship.
To answer the question "Am I out of line for saying this?" I'd say you're well within your rights to believe whatever you want and say what you believe, but expressing that particular opinion to that particular person was kind of a dick-move and you should apologise if only to clear the air. You were basically calling him disfunctional in a way that harkened back to the days when homosexuality was classified as a psychological disorder. It's not.
As for the genocide question: it's not like calling for genocide, because unless your hypothetical "cure" these people involves a bullet to the head presumably they'll survive the procedure with no noticable changes except to their sexuality.
In answer to the rest of the post, stricly speaking, yes, it's a disfunction. In the same way that all deviations from the platonic ideal human are disfunctions. Your reasoning about the children thing is flawed though. As you said, alternatives like adoption, surrogacy etc. do exist.
There is an added bonus to gay parenting that most people don't consider: It encourages responsible parenting. It's not possible for a gay or lesbian couple to get drunk and accidentally adopt a child, therefore every child raised by a gay family is wanted. Every child raised by a gay family will be raised with all the financial, stress-related, social upheaval related concerns etc. duly considered before this big step is taken. That is not true of every child raised in a heterosexual relationship for precicely the same reason you give for the need to cure homosexuality.
If a person wants children, they will use the ways available to get one. Being gay won't stop that. If someone doesn't want children, then actually their quality of life is threatened by being heterosexual because of the risk of accidental pregnancy associated with their persuing a normal, healthy sex life.
The "Doesn't allow for natural conception of children" argument in favour of curing only stands if you think procreation is the only thing that can give a person's life enjoyment, meaning, and worth.
Think of what you would be doing if you 'cured' same-sex attraction. In the case of a bisexual child, you will be artificially limiting their chances of finding a partner that makes them happy and fulfilled. In the case of a homosexual child, you will be saving them from potential future bullying and ostracism, yes, but bullying isn't an inication of something wrong with the victim, it's an indication of something wrong with the bully. You will also be telling that child that they were broken and needed fixing while at the same time fundamentally uprooting and changing a drastic part of their sexual development. That kind of physiological and psychological trauma is definitely not needed, especially around puberty when sexual development is being uprooted and shaken up enough.
In both cases you would be drastically and fundamentally altering the hormonal and brain chemistry of a person just so it would be easier for them to concieve a child. This at a time when the earth is already beginning to be overpopulated, and children are already going without proper families to raise them.
To conclude: I think you're wrong. I think you're well meaning enough, but the opinions you've expressed have the potential to insult and I certainly don't blame anyone for being offended by the suggestion that homosexuality needs curing. You definitely owe your friend an apology, no matter how immature his reaction was. You're not a Nazi though, and I'm kinda disappointed that what could have been an interesting discussion was derailed so thoroughly on only the second post.