There are plenty of folk songs about homosexuality, but almost all of them are bawdy, either songs in their own right or else parodies. Sometimes there is just a passing reference. For example in The Bastard King of England you find this verse:

The Duke of Sussex got on a horse,
And rode straightway to France,
Where he swore he was a fluter,
So the king he dropped his pants.

And in The Ball of Kerrymuir there are these lines:

Oh, the Ball, the Ball of Kerrymuir,
Where your wife and my wife were firkin on the floor.

Presumably they were firkin each other, although they simply could have been separately firkin other parties, male or female. The lesbian possibilities add to the humor.

Then there are entire bawdy songs, including the following political parody of Puff the Magic Dragon. The songs deals with the exclusion of lesbians and gay men from New York City's annual Saint Patrick's Day Parade. The courts have ruled that the parade is a purely private event sponsored by the Ancient Order of Hibernians, and if A.O.H. doesn't want to let them march they have every right to do so.

PAT THE IRISH FAGGOT

Oh, Pat the Irish faggot,
Lived in New York town,
And dreamed about the big parade,
When Saint Patrick's Day came round.
Pat the Irish faggot,
Lived in New York town,
And dreamed about the big parade,
When Saint Patrick's Day came round.

But the cardinals and bishops,
Said that buggery's a crime,
Unless it's done to altar boys,
Below the age of nine.
Still Paddy waited patiently,
Again each year he'd try,
Said the leaders of the A.O.H.:
"No faggots need apply!"

Then one sad day it happened,
Poor Paddy he turned straight,
And like a good straight Irishman,
He joined the A.O.H.
But at his initiation,
Much too his surprise,
A hundred naked Irishmen,
Pranced before his eyes.

Some had gaping ass-holes,
And some had quivering hips,
Some of them had hard-ons,
Or semen on their lips,
Some of them were married,
Some celebrated mass,
And some went up to Paddy,
And kissed his Irish ass.

Now Pat the Irish faggot,
Marches every year,
You can watch him blow his Irish pipes,
And never know he's queer.
While the A.O.H. will tell you,
That gayness is a sin,
Pat the Irish faggot knows,
Their secret's safe with him!

Before you slam me for posting a homophobic and hibernophobic song, let me state that I got it from members of the Irish Lesbian and Gay Organization, the group that has been fighting for the right to join the New York parade.