What terms are generally accepted/disliked/preferred by the gay community?

The question about gay people in the military made me think of this.

I know that the vocabulary of the LGBTQ community is a pretty personal thing; some people are okay with being called “lesbian”, for example, but hate the term “queer”. Are there certain terms that LGBTQ people in general prefer to others?

I know that the best term to describe LGBTQ people is “people”; I don’t mean to offend anyone in asking this question.

Is “gay” an adjective only, or should it be used as a noun as well? It sounds strange to me as a noun: “Uh oh, watch out; it’s a GAY!”

I have a male friend who’s gay and very effeminate; every so often I joke with him by telling him “Wow, you’re such a fag!” It’s a little thing between us, and I know it doesn’t bother him, but if someone were to overhear they might misunderstand.