I've heard several versions as to why it is now used to describe homosexuals. It's original meaning is from the became 12th century meaning cheerful and joyful. Later it became a by word for anything that was 'showy'. Later on, I think in late Victorian times, it began to be used about men and women who had lots of illicit sex. I remember seeing a document which described a promiscuous girl as 'ever so gay'. In the 1920s it began to be used about men who had sex with other men but it was not widely used because it was underground. This was long before it became a modern description for homosexual men.
Liberace's signature tune, 'I'll be seeing you' had a line which said, 'In everything that's bright and gay, I'll always think of you that way.'(approx) He sang that in the 1950s.