Thank you Rich

[Miriel]

In Tolkien's day, 'queer' was basically a synonym for 'strange, weird'. It's not until the 1960s that the sexual meaning started to displace the older usage. Monty Python (early 70s? - I don't know the sketch you're talking about) would have been playing on what was still, at that time, a dual meaning.

Actually, it had been used in that sense since the '30s, by conforming gay men who prefered it to "fairy".

Since Graham Chapman was gay (the very normative kind who didn't like those who weren't normative, as proven by the frequent homophobia in the show) and knew these words fairly well, I'm fairly certain that "queer" in that sketch was pejorative for "homosexual".