Have you considered that maybe it was a slightly off-color joke made by someone "in the know"? Perhaps it was a professor who is out to the rest of the faculty but doesn't really make it known to students. Maybe there was an anti-gay protestor on the campus the day before that used giant cutouts of fruit to make their point, and the professor was cracking a joke at the expense of the anti-gay protestor. I think that you should bring it up to a few people and see what happens. It's easy to dig ourselves into holes of depression when we aren't interacting with others on a regular basis.
What makes you think that the other institution is anti-gay? Is it a religious university?
If there truly is an issue, I would just get your masters and go elsewhere for a PhD. I'm sure that even if another university weren't such a perfect fit, you would be so much happier not being actively discriminated against.
Best of luck. Let us know what you decide.