Perhaps "gay" is the only pejorative left to our children -- in my experience, I note that our youth describes things as "gay" more often than anyone else. Political correctness has stripped us of all words that might possibly offend anyone, even minutely. I note that no one used this word in this way back when I was in sixth grade. We had a lot more choices back then.
Kids are efficient. Their vocabularies aren't as large, nor their base of experience, as adults. They need to get their point across inmediatamente, as is the nature of kids. They know better than we that one word often is far more clear than ten.
When I hear or read a word, I consider the context. I rarely find the word gay being used to offend homosexuals when used as a negative adjective. I just don't feel the hate (that could be there if the term "faggot" were being used) when hearing or reading some kid describing something as "gay", because the delivery is so offhand; there's no intentional offense being given. And since I often happen to like the things being described (especially when the term's being used by younger computer gamers), I marvel at how well our youth has plugged in to gay sensibilites.
However, if I find the word in context offends me as a gay person ... I'll say something to the person making the utterance. I calmly state I'm gay, and leave it at that. The other person will then either expose their own fear of homosexuals/ity, or they'll realize they've given offense with cause aforethought. Usually some form of intelligent discussion ensues. This is one of the benefits of being a homosexual; since we're an invisible minority, we can pop up in the most unexpected places.