I chastised them and asked a few pertinent parental questions, as you do.
It turned out "you're so gay" had nothing to do with the sexual orientation of the person or activity that they were describing.
In the context that they were using it in, gay meant stupid or dumb.
My son - who was about 8 or 9 at the time - snorted at me with a knowing contextual derision that made me realise he knew all about the word gay's various interpretations - including the homosexual term.
In other words, he thought it was gay that I thought he had been using the term gay in a homosexual context.
So John Key is right - the term "gay" can mean dumb or stupid.
However, when you're referring to someone's shirt, and you call their shirt "gay", you're walking a fine line.
Try this - substitute the word "gay" in the above quote for "stupid" or "dumb".
Then substitute it for "poofter" or "homo" - in other words, alternative derogatory terms for homosexual. Interesting exercise, isn't it?
I suspect John has confused his colloquialisms and in an attempt to be hip has become a square by meaning one thing, saying another, and ending up with the complete opposite of what he originally intended.
It was so much easier in the old days when gay meant homosexual.