What do you dislike?

[Chutzpar]

Okay, now I will explain why using gay as a pejorative is a bad thing.

Yes, gay did initially mean "happy", but words change. Lesbian originally referred to an inhabitant of Lesvos.
Gay has however evolved to mean homosexual. It's just a descriptor. It's not like there's some cabal of gay men who went "I know what'd piss off those breeders, lets make gay mean what we want it to, BWAHAHAHA!"
Its first use is thought to have been somewhere in the 30s so you're not going to see that changing any time soon, brah.

But the use of the word gay as a pejorative is directly as a result from its use to describe homosexuals. The implication is that being gay is a bad thing.
It's the same way it's not very nice to use the word "retarded" or "lame" (which I'm really guilty of and I'm trying to address!), it's making a value judgment on a group of people by using it as an insult.

Saying "HEY GAY MEANS HAPPY THOSE GAYS HAVE RUINED IT" is fucking... I don't even know. It makes you sound tremendously privileged, for one thing. The "words have all the power you give them!" is a very poor argument. The meaning and the intention of words are a powerful thing.

COOL STORY, BRO:
I have some friends who are gay (this is relevant). I've been described as an honorary dyke by some of my friends, and when they say it, it's nice, because it's an in-joke that's just kind of become part of our vernacular.
Being called a dyke by a stranger at school (this happened with alarming regularity, my school ruled!), is kind of a different thing.
Especially when it's accompanied by threats to "straighten you out", or having dog shit thrown at your head!