His “tolerance wall” was about bullying in the schools and had tiles created by several students.
Not a project that really shows leadership or other scout traits but where he lives may have something to do with the acceptance of such a project for Eagle.
In my son’s district, several scouts have been rejected for Eagle and it is not unusual. None have gone on to complete it after being rejected. Usually, it is for not taking the requirements seriously enough and/or not completing them all.
I suspect that his being gay has little to do with his rejection. This one smells like more pressure to get the gay agenda forced upon the B.S.A. - again.
The bullying also sounds like either a lack of leadership at his troop level (unlikely) or hypersensitivity from a scout that has an entitlement mentality.
I would bet this kid was declined for Eagle because his project is so lame.