The term "breeder" started out as some members of the gay community's response to words like "faggot," "homo," and "dyke."
It was/is used to shock straight people, some of whom go about their lives assuming that just because the way they live happens to be very very popular, that it is completely without faults and therefore impervious to verbal assault. Breeder is a shock-term. I've seen some of my friends call heterosexuals breeders in arguments (which are usually started by people coming up to us in public and kindly pointing out that we're going to burn in hell), and the heterosexuals are truly taken aback. You can almost hear what's going on in their heads: "Hey! They're not supposed to have a word for us! We're normal!"
It's a pretty mean word. But hey, so is faggot. Can you blame people for wanting to be able to fight back?