I don t see any gay references in this song, but as Dylan is often as not writing poetry, the listener can interpret it through their own sensibilities. I think the song is obviously a scathing assaul on a certain type of person- ordinary (Jones or Smith, common names), living a narrowly prosaic life, unimaginative, and probably pretentiously assured of the correctness of his life and his judgment of others . Whether by curiosity or serendipity, Jones stepped into a room full of people, regarded by the silent majority as a 'freak show' and just couldn't t make head nor tail sense of it. But it was a world that wasn't meant to make sense- Dylan often used circus metaphors in his songs of those years (see Desolation Row) and the circus is alive in 3 rings here. And what was going on was that this strange alternative world, incomprehensive to Jones- was vibrant and disorderly and unpredictable. To him it thrived grotesquely but could not be understood . Jones is the one who is easily understood, by the singer and by these outsiders, thus the line - "you re very well read, it s well known."

And of course what was happening here was - amongst other things -peace love and understanding preempting the old order of moneymaking, status & conformity. Individual freedom of expression, sex drugs and rock n roll - and protests against the war, the early seeds of environmentalism, woman s movement, black power, etc

What was going on was Mr Nixon complaining that there were too many Jews in government, while at least one Jewish reporter was discovering a story that would bring the world of Mr Jones and Nixon and his entire smug and smarmy league - to its knees.

You know a true artist is a visionary, and Dylan was and is a true artist. He has said that he doesn't t really write his songs , they flow through via a muse. And I say G-d bless Dylan s muse.