In the spirit of disseminating (maybe the wrong choice of word
) Straight Dope - Watson and Holmes were not a gay couple. As outlined previously in this thread, Watson was definitely married. He married Mary Morstan, whom he met in the first of the books, but it appears she later died. Evaluation of other stories by hard-core Sherlockians suggests that Watson may have been married two or three times. (The stories do not give sufficient details to really know. Indulging in rational speculation is known as playing The Game.) And, in the stories written by Doyle, Watson writes enough times of women being attractive or comments on their figures that a sexual interest in men would be totally out of character.
Holmes, on the other hand, is presented as non-sexual. He is disinterested, but this is a far cry from being interested in men. Assuming they are homosexual based on them living together or being around each other is a poor assumption and could be applied to the characters BMalion mentions above, Rocky and Bullwinkle, Laurel and Hardy, or millions of college roommates across the world.
This has not stopped many people from considering a homosexual relationship between the two. As t-bonhamAscc.net mentioned, there has been at least one story written on that theme. It has also been the subject of cartoons in porn mags and, I believe, at least one gay-porn movie.
The primary reason they could not be gay is because their creator, Arthur Conan Doyle, could never have made them so. He would have been shocked at the suggestion. While Doyle was probably not a homophobe, he unfortunately thought homosexuality was a sickness that could be treated and cured. (The following comes from Dan Stashower’s biography ‘Teller of Tales: The Life of Arthur Conan Doyle,’ pp. 107, 329-330.) In 1889 Doyle had dinner with Oscar Wilde at which both were commissioned to write a book for Lippincott’s Monthly Magazine. From that dinner the world got The Picture of Dorian Gray and The Sign of the Four. Doyle expressed his respect for Wilde and continued to do so after Wilde was sent to prison for his relationship with Lord Alfred Douglas. Stashower says that Doyle “believed that Wilde’s homosexuality was ‘pathological’ in nature, and that a hospital rather than a police court was the place for its consideration.’”
Doyle presented a similar attitude towards Roger Casement around 1915. Casement and Doyle both worked to publicize the atrocities in the Belgian Congo. Casement later tried to work with the Germans during World War I to cause a revolt against the British in Ireland. He was convicted and sentenced to death. When Doyle and others made pleas for leniency, the British Government circulated among influential people Casement’s personal journals describing his homosexual relations. This was done to squelch the appeals for clemency, and Casement was eventually hanged for treason. Doyle considered Casement to be “a fine man afflicted with mania” of which his homosexuality was just one manifestation.
So in answer to the OP, Holmes and Watson were not gay. There was nothing in the stories, or in the background of the author to make such a case, in spite of whatever conjecture may appear.
In the spirit of the OP – I admit that Watson does publicly ejaculate a lot. And Robert Stephens as Holmes in The Private Life of SH does appear set for a wedding in San Francisco. So, perhaps the jury is still out?