He's fully heterosexual.
I think he's just overcompensating with the hypermasculinity and gay slurs because he was mocked and ridiculized as a human, mama boy, and poet. As is often the case with men like him, putting as much distance as possible from 'feminine' aspects/traits is a way to protect himself from ever being mocked again.
Joss said he and Angel slept with each other on the Hole in The World DVD Commentary