I’m absolutely sure my Catcher shirt is gay.
Maybe the ring tone on that phone mentioned in the OP was a snippet from a Melissa Etheridge MP3? 
(Sorry, I could not resist. No offense to anyone meant.)
Disclaimer: I am not homophobic and do not condone the use of the word ‘gay’
as a derogatory word.
But…
The kids in the O.P (if they were anything like me and I’m pretty sure a lot of you) were probably using the term without any realisation of its genuine meaning, more than likely they heard it on ‘Southpark’ and thought it was kinda cool sounding. As a kid we used terribly insulting words to insult peoples mothers, sisters, sexuality etc without really having any grasp of the possible implications of what we were saying. We knew they were rude and we all liked insulting and being insulted - it was part of the fun. Now, I have grown up to be a perfectly polite, normal person who doesn’t feel the need to insult people for fun as I am now a grown up. Basically I could understand the OP kicking off because an adult said this but there is no point getting angry because some children did as I’m pretty sure by the time they hit high school or college they will have changed a whole lot.
I also wanted to draw some attention to the fact that it is perfectly possible for words to have more than one meaning
Objection! Already asked and answered.
Zombie lesbian phones. What WILL they think of next?