At any given time you would always have a healthy share of gays in showbiz and art - throughout all cultural ages. It's not a new thing at all.
I can see how the lead singer of, say, Molly Hatchet or Bob Seger outing themselves as gay would have affected the Hatchet/Seger fan base, but with "Dame Halford" - who pretended to be surprised if he had more than a fleeting knowledge of Priest's stage show and lyrics? And to me, Billy Squier wasn't an archtypical macho rock male, he was somewhere between power pop and hard rock, his music had crossover appeal right from the start (hence all those hits), he wasn't Ted Nugent or Manowar you know. Squier's type of genre really didn't pin him down that much (you would think), he could have been a ham-fisted male, gay as a goose or just androgynous - anything goes. And, apparently, he wasn't even gay, not that it should have mattered either way.
Ok, so you weren't supposed to dance in a rock video until Pat Benatar came along with Love is a Battlefield,
but that actually predated Squier's vid! I wonder whether the director was aiming for something like that, breaking down barriers between rock pop and dance pop (plus presenting him more as a handsome solo artist rather than a "one of the boys"-band member) which made sense with Squier's female constituency and the rising importance of MTV where you didn't want to be relegated to presenting rock bands always in a phony live setting. But of course, Pat was a woman and her choreography was put in the context of a story the video told while Billy skipping about was kind of unmotivated. (I tend to pee and then take a coffee first thing in the morning, dance routines come later.)