I'm with you; I would have left. I might not have made a big deal about it in front of young kids: "Let's go get ice cream before this ends and we get stuck behind a crowd", but I would have left.
If you go back to the 1920s...what would have happened is that a couple of folks would have had a small grocery bag with them, and likely tossed tomatoes at the drag queen. That would have been the more appropriate manner of handling this. I doubt if NY cops would even react to tomato-throwing.