Not that there’s anyth…Ahhh, on second thought, never mind.
You know, I never thought of him as being possibly gay before, but now that you mention it (and I am very familiar with that episode as it is one of my favorites), I think they MAY have been hinting that he was gay. Good catch!
In the 1960s, it was a common trope, at least among high-schoolers that gay men wore green on Thursdays. There doesn’t seem to be a lot of backstory to explain it, though it was common enough to be referenced in the National Lampoon’s Yearbook Parody.
It’s possible that that evolved into the aforementioned “hanky code.”
Yes. The point is that it’s not clear. The earring suggests that he might be gay… and he might not. AS PYD notes, the whole episode is about misconstruing and making assumptions that may or may not be factual. Jerry and George are “outed” through misunderstandings and assumptions, so this is an example where they, too, might have made an assumption.
I always thought the “piercing on the left means you’re gay” thing didn’t make any sense unless you were in a place like Provincetown or San Francisco. This was pre-Internet, and there didn’t seem to be any definitive source for this. And it’s not like it’s the easiest thing in the world to pierce the other ear if you got it wrong. 
Maybe it doesn’t make sense but word of “left earring = straight, right earring = gay” had trickled down to whitebread all-straight suburban Michigan pre-teens by the mid-late 80’s, so it was certainly around and widely known well before Seinfeld even began.