You leaving off the weirdest part. They played Ave Maria twice, once for each time an audience member feinted. Then he requested it a 3rd time and specified he wanted the Pavarotti version this time.
If you watch the interaction, it seems like he's unaware that there are multiple recordings of Ave Maria. He says something like, "they played the one without the words. Play the real one."
So, technically, the song is not intended to be a low-key gay song. Victor Willis, the Village People founder, lead singer, and the one who wrote the song, has said that the lyrics are not meant to be suggestive of a gay message as he is not gay. Rather, the song was meant to evoke a hopeful message to people like himself who grew up an urban youth and needed community as well as being open to all others. He did not intend the suggestive message that the gay community interpreted from it, but he was also happy they love the song.
So, the song occupies a sort of weird mixed space. It is whole-heartedly embraced by the gay community as an anthem for the LGBT and projects a positive welcoming message for young confused or lonely gay men, which was unintended but welcomed by the writer. It is also widely embraced by straight people as a fun poppy song with a kitschy dance that everyone knows. They play it in grade schools, they play it at weddings, they play it at roller rinks.
So the gay association is only one facet of the song. For those who have a problem with things associated with the gay community, that means they either amplify that association and vilify it, or they downplay or ignore the association and just think of it as the catchy song with the easy dance. Or people accept that associate as well and just enjoy the song and dance.
That being said, Trump might be the kind of idiot that actually is completely oblivious to the association with the gay community altogether. Who knows.
The band had a very macho-gay theme. I'm a little surprised the lead singer isn't gay, I assumed everyone in the band was gay. Gay clubs were also super into disco. Even if the lyrics aren't about being gay, it has lots of gay associations.
The song was co-written by Victor Willis (the lead singer) and Jacques Morali (their producer). Originally, executive producer Henry Belolo was also credited, but his name was later removed after lawsuits.
Willis is straight (as far as I can tell publicly in any case) and has indeed claimed that the song is simply about the YMCA and has nothing to do with gay culture.
However, Morali is gay. He was essentially the founder of the group and has been quite explicit that the group was created to because he "[wanted to do something only for the gay market"](wanted to do something only for the gay market). The name "Village People" is a reference to Greenwich Village, a gay community.
So we have 2 writers credited. One of whom was the singer who was hired on and later left while the group continued in without him, who claims the song was not about gay people at all. The other was gay, was basically the founder, and has been explicit about how the whole project was intended to target gay people all along.
So I suppose every listener needs to judge for themselves. But my own conclusion is that it's 100% about gay culture, just like most of the rest of their catalog. I could only speculate as to why Willis wants to distance himself from that.
Maybe he never expected to become a gay icon and was never comfortable with it. Maybe he's trying to to make sure that the song appeals to the largest market possible for the sake of getting more royalties. Or maybe there's something else going on.
The big writing behind him says "TRUMP WAS RIGHT ABOUT EVERYTHING", if anyone is curious. They kept it out of the shot when recording the stage but the writing was visible on the screens of the phones the audience were holding up.
I assume the lawsuits are coming so that he can't play music from any artist other than weird evangelical church choirs or whatever crazy people following him do for singing.