I had heard that the usage of Gay for Homosexual goes even further back, and can probably be traced to the late 1880's in London, when a woman having gone gay meant she was a prostitute,
It comes to us from Gay Polari, which was a language of code used by homoseuxal men in the UK during the 20's and onward (it is making a resurgence of sorts).
So in code, gay meant homosexual, omi was a man, palone was a woman, omi-palone was a homosexual, etc.
Bona to vada your dolly old eek (Good to see your pleasant face).
Bona latty (Nice house)
Vada that omi's bona lallys (Look at that guy's nice legs)
It was a way that gay men could talk without being understood by others.
If any one is interested in Polari here are some links:
Polari - A Cinderella Among Languages (
http://members.aol.com/frij/)
Hugh Young's Lexicon of Polari (
http://www.homeusers.prestel.co.uk/cello/Polari.htm)
Polari (
http://www.chris-d.net/polari/)