Ghey & faggot from someone the age of willow Palin means “stupid” or “lame”.
Use of “that’s so gay” goes back to the 80s or early 90s, when kids would say it as a substitute for “that sucks”, because the latter was unnaceptable, and homosexuals...well you know. Funny thing is now people use “that sucks” in conversation without raising an eyebrow, but “that’s gay” is an unacceptable slur.