If you go into the other room in the Honey Bee Inn, Could actually has sex with another guy. The screen goes black and you get "Bump, bump, bump, bump, bump... squish!" in the message box. The lights fade back in... with both of them with their clothes on obviously, and Cloud looking rather surprised. The prostitute he was supposed to have sex with promptly apologizes. No kidding.
But that's the only remotely homosexual moment I've found in a game... besides the Legendary Halo ending.
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