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>Anything and everything can be offensive — it’s purely subjective.

Right, and Apple is exercising their right to find the app offensive. Why is this a story?

That's really the problem with walled garden systems. One group of people decides for everyone what is/isn't offensive.
In reality, they're deciding for themselves - which is fair. It just happens to affect you because you use the outcome of that decision.
Technically true, but under such a model it always has the potential to affect you.
Maybe someone is exercising their right to find Apple finding the app offensive offsensive.
Gay guy weighing in here: Apple is not homophobic in keeping this nonsense app from their store. By throwing the accusation around, we risk devaluing it. Apple, Inc scored 100% on the Human Rights Council's Corporate Equality Index. Calling them homophobic is like calling Edward R. Murrow a communist -- it shows your desperation immediately.
The "Human Rights Council's Corporate Equality Index" is something that seems to mostly relate to employment practises.

I doubt it has provisions that cover app stores.

You are correct, it does not cover app stores. It does, however, display a certain corporate culture that is indicative of how such mechanisms within the company are likely to operate. My hypothesis regarding this rejection is that the reviewers found the app itself to be homophobic because it relies on tired stereotypes about gay men and is, in fact, not funny at all.
I have no idea why they rejected in this instance.

Not sure if such accreditation really prove anything other than that a company is willing to jump through some hoops to get a sticker though. It's like PCI accreditation and other stuff like that.

Apple pays the tax on health benefits for same-sex couples, a tax that opposite-sex, married couples don't have to pay because the government recognizes their union. Meijer, the grocery store chain, has a history of firing employees for being gay. For this reason, I see the HRC Equality Index as more than 'some hoops to get a sticker': companies go out of their way to improve the lives of gay people who work for them are awarded such distinction.
or companies who want a sticker that says they "go out of their way to improve the lives of gay people who work for them".

That's really the point of these things, to provide capitalist incentives for such behaviours.

This is a major no-win for Apple.

Take out app made by a gay guy? Homophobic.

Not take out the "flaming" app, thus offending lots of homosexual men (that are men first, homosexual second)? Homophobic.

I hate those sort of situations, specially when it result in some people always losing.

Here in Brazil we have a conservative politician (he would fit right into Tea Party if he was at US), that once went to protest against a "gay kit" that the ministry of education wanted to give to schools... Several gay people were against the kit, because if was badly made, it was of bad taste, and attracted flak from society, beside being a waste of taxpayer money.

Returning to our politician, he stood behind a TV interview of another politician, holding his anti-gaykit (not anti-gay mind you) pamphlets. A pro-gay poltician started to shout that he was homophobic, attacked him physically, and then the assaulted guy got sued later... (at least the lawsuit was thrown out). Later some gays supported the guy, not that they agree with him, but they think that the female pro-gay politician that attacked him was against free speech. Of course, those got called "homophobic" too (even being gays).

I can conclude that some words, are more about insulting your opposition that disagree with you, than real labels.

This apply to homophobic, MRA, racist (not that real racists don't exist... mind you), misogynistic, and so on...

To be fair though, there is a lot of homophobic laws in the world.
Well, when you police for taste, you eventually get burned by the subjectivity of the whole matter. This is the quintessential "you made your bed now sleep in it" example
Why do people act surprised again and again? It's Apple's playground, you play by their rules. Rules can change over time. It's been this way since app store launched. Just live with it. Or develop for android or something.