'Gay,' well, now apparently has three definitions: one definition of gay is a [man who acts like a woman], another definition means calling something or someone other than stupid/silly/crazy/retarded, and lastly, it means "happy." Go up to any non-homosexual and call them "gay," they'll probably be pissed, but in general, I don't think "gay" will kill you. In fact, there might be a state with a city called "Gay."
If you're arguing about whether or not one word is as bad as the other and you refuse to say one of the words, THAT'S the worse word. "Gay" can be used as derogatory, but it isn't an inherently bad word. The n-word, on the other hand, is a slur and nothing but a slur.