There seem to be two debates happening here: One has to do with how we should interpret and engage lyrics we find objectionable in artists we otherwise like. I like that debate. The other is whether we should defend an artist's right to hate queers (or by extension other groups different than them, particularly minority or marginalized groups). I don't want to participate in that debate. On the "fragmented communities good/bad" debate I've pretty much made up my mind and will sail with those who have made up their mind a similar way; my looming life changes reflect this commitment.
I am also beginning to think that in order to be intellectually honest about this, I need to disregard my like or dislike for particular artists and just "study the phenomenon."
The foundational question, and we can dance around it all we want, but we wouldn't even be talking about this if there weren't this foundational question: Given that we have decided, as progressives, to reject _normative homophobia_ and the moral and political positions that subordinate homosexuality, do/does the artist(s) in question cultivate that normative/political/moral subordination?
Given that foundational question, I would ask three additional questions in regard to particular artists deploying homophobic lyrics: Has there been any media/alternative media commentary about this? Is there a case to be made for irony or some other alternative interpretation? Is it consistent with the artists' other relevant lyrics?
Finally, if an artist offers up a personal interpretation of their lyrics, we should in some sense privilege that interpretation, but as we know, it's not decisive; there is room to weigh the artist's intent with other considerations.
The answers generated by these questions won't always be definitive or final. Interpretation, as we know, doesn't have a final end point and some would perceive these questions as being too certainty-seeking. But as has been clear from the outset of this conversation, I am not demanding people stop listening to artists whose lyrics marginalize.
PS: I like Steve Greaves' review of IT here, because it both respects and questions. Sometimes you'll go to those lengths when you recognize an artist's brilliance and are appalled by their ignorance.