On arrival at the event in Pt Chevalier's Coyle Park, Mr Key was greeted by a woman wearing a T-shirt which read: "It takes two to ... condoms and lube."
The shirt, worn by Rachael Le Mesurier, executive director of the event's organiser, the Aids Foundation, was promoting sponsor Marquis Condoms and the event's safe-sex message.
Ms Le Mesurier was thrilled to have Mr Key back at the festival after his previous attendance as Opposition leader.
"He has shown support for our communities - the gay, lesbian and bisexual communities - and for the fight against HIV," she said.
But not all were thrilled.
On his meet-and-greet rounds, the Prime Minister's attention was welcomed by many but spurned by Julie Radford-Poupard, of Pt Chevalier.
She said he had a cheek to turn up - "because he didn't support the Civil Union Bill, a fundamental human right of our community - the queer community".
Mr Key's badly timed dance routine, set to
Over the Rainbow
, was his second brush of the day with the big hair and multi-layered make-up of the drag scene.
Earlier, a queen named Ivy rushed up to give the country's leader a big hug.
Asked if he liked Mr Key, Ivy - Robert van Dijk - said: "Not really. I'm a Labour supporter."
Mr Key told reporters he attended the event annually to support the gay community.
"I've made it quite clear that I want to run an inclusive society and that means inclusive from an ethnicity and from a sexuality point of view."
