That's weird. Why would simply looking each other in the eye or placing a hand around someone's back be so stressful and disconcerting? Why are people so homophobic?

First, the social implications matter much more than the actions. Consider the difference between a gypsy and a swing. In a swing you hold onto each other, look into each others eyes, and move in a circle. In a gypsy you do mostly the same thing without touching. Yet the gypsy is more charged, more flirty, and a bit more intimate. [2] Or consider going the other way, from a swing to an aleman, where you still have the touching and the eye contact, but the intimacy is much more reduced than you might expect from just the change in hand positions.

At a contra dance in DC or Boston, two men dancing together indicates little about their sexual orientations. Sure, men who often dance with men are on average more likely to be attracted to men, but there are enough straight men who dance with other men that it's not a very reliable differentiator. If you go to a place where men don't usually dance together and everyone thinks of that as something that only gay men do, then when men choose to dance together other people will think they're probably gay.

Now, I said "choose", but if we're talking about the caller saying "gents gypsy once and a half" there's not really a choice. As long as you didn't intentionally put yourself in a position where you're swinging with another man, how does the caller's telling you to do it matter? Imagine you're a male high school student with long hair, and the principal calls you into their office to tell you to cut it short. [3] This is infuriating partly because you're being told what to do, but also because it's forcing you to indicate to other people you're someone you aren't. Short hair vs long hair means something, it's identity, and you don't want to be grouped with the people who choose to have short hair. Even if the whole school knows the principal made you do it, sending signals you don't want to send is deeply uncomfortable.

Back to contra, I think a lot of the resistance men give to swinging or gypsying with each other is that they don't want the caller to make them do things that they think you'd only choose to do if you were gay. It's about not wanting to be forced to misidentify.

In parts of the non-gender-free dance community where men are ok dancing with each other there are two related factors: being gay is acceptable and not very important, and men dance together for reasons other than sexual orientation often enough that it doesn't say much about them. These probably move together: the worse it is for me socially if people start thinking I'm gay, the less willing I will be to dance with my male friends.

So as a caller, when you're in an environment where men don't want to dance with each other, should you keep that in mind when choosing dances? Maybe some analogies would help:

Suppose I called at a contra dance in the States and said that I expected everyone to dance with the same partner all evening as I felt that partner swapping in contra was contributing to the breakup of marriage because people are constantly searching for new excitement rather than sticking with their husband or wife? (source)

What if, say, a caller from England came to America, and noticed that dancers here only danced with people who had the same color skin. And the callers enforced this, by, say, never calling a mixer. Should that caller from England also not call mixers, because hey, he can't expect Americans to feel the same way he does about race? (source.)

I'm still not sure.

(This is coming out of a discussion on the sharedweight caller's list.)

[1] Because of the way homophobia works in our society, you could go almost anywhere and call a ladies swing or gypsy and no one would mind.

[2] Some of this is that the focus of a gypsy is the eye contact in a way that the eye contact is only secondary in a swing. But there's a different interpretation of gypsies.

[3] And I guess also imagine it's 1968.