Oh, yeah, I definitely associate Utah and Montana with people who are uninhibited and experimental, and "polite" and "kind" are the first words that come to mind for Mississippi and Alabama.

Or maybe that's just my rude, sarcastic New England self coming through.

The line is like 95% of the way through the song and its a single use of the word, not multiple slurs.

Personally, I always figured it was a tongue in cheek reference to the homophobia of the very conservative US military of the Vietnam Era, not that he was himself referring to gay men in that way. But sure, people can be offended about it if they like.