There's a piece on the phenomenon here, though I'm not sure why it classes as news because everyone even vaguely aware of young people has known it for a long time. I was quite surprised that when I was a teacher, I was one of the few who objected to its use. As far as I can tell, it's a word used to describe an aspect of some people which they can't control and hence is inappropriate for use as an insult.
I'm sure I read someone arguing that it was appropriate because children's words and attitudes showed that homosexuality was intrinsically evil. Odd that we don't seem to see that sort of attitude in ancient Greece then, which suggests the commenter may have to come to grips with their own homophobia.
Here's my comment which I tried posting on the above page. I don't expect it to get included, because it isn't especially politically correct.
"Blowing trivial matters out of proportion" is not a good way of teaching. Much better to deal with the problem by always taking the word in its sexual sense and gently mocking the child who uses it in ways that don't then make sense.
But on the other hand, the concept of sexual orientation is itself an unhelpful one and does not go "to the core of someone's identity". There are people, and there are sexual desires. And most people experience most sorts of sexual desire at some stage. My identity is not defined by whether I prefer Indian or Chinese food on a given day.