The Theravada tradition doesn't have anything to say on the matter. The essence of Theravadin morality is expressed in the Ambalatthika-Rahulovada Sutta like so:

Sexuality in general is technically classified as being unwholesome or unskillful, but the Theravada school makes a distinction between acts that are unwholesome (anything based on attachment at all, so this also includes enjoying entertainment, food, etc...) and acts that are evil. Sexuality that is within the third precept (not using sex in ways that breaks up relationships, sexual taking advantage of people etc...) is understood as being acceptable for a layperson. Although this Sutta talks about abandoning all unwholesome states of mind, it was aimed at the Ven. Rahula who was a novice monk at the time. For laypeople one only must abandon evil actions.

The Theravada tradition doesn't condemn such people. The essence of Theravadin morality is expressed in the Ambalatthika-Rahulovada Sutta like so:

Sexuality in general is technically classified as being unwholesome or unskillful, but the Theravada school makes a distinction between acts that are unwholesome (anything based on attachment at all, so this also includes enjoying entertainment, food, etc...) and acts that are evil. Sexuality that is within the third precept (not using sex in ways that breaks up relationships or sexual taking advantage of people etc...) is understood as being acceptable for a layperson. Although this Sutta talks about abandoning all unwholesome states of mind, it was aimed at the Ven. Rahula who was a novice monk at the time. For laypeople one only must abandon evil actions.

"What do you think, Rahula: What is a mirror for?"

"For reflection, sir."

"In the same way, Rahula, bodily actions, verbal actions, & mental actions are to be done with repeated reflection.

"Whenever you want to do a bodily action, you should reflect on it: 'This bodily action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful bodily action with painful consequences, painful results, then any bodily action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful bodily action with pleasant consequences, pleasant results, then any bodily action of that sort is fit for you to do.

"While you are doing a bodily action, you should reflect on it: 'This bodily action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a bodily action, you should reflect on it: 'This bodily action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful bodily action with painful consequences, painful results, then you should confess it, reveal it, lay it open to the Teacher or to a knowledgeable companion in the holy life. Having confessed it... you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful bodily action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

"Whenever you want to do a verbal action, you should reflect on it: 'This verbal action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful verbal action with painful consequences, painful results, then any verbal action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful verbal action with pleasant consequences, pleasant results, then any verbal action of that sort is fit for you to do.

"While you are doing a verbal action, you should reflect on it: 'This verbal action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a verbal action, you should reflect on it: 'This verbal action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful verbal action with painful consequences, painful results, then you should confess it, reveal it, lay it open to the Teacher or to a knowledgeable companion in the holy life. Having confessed it... you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful verbal action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

"Whenever you want to do a mental action, you should reflect on it: 'This mental action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful mental action with painful consequences, painful results, then any mental action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful mental action with pleasant consequences, pleasant results, then any mental action of that sort is fit for you to do.

"While you are doing a mental action, you should reflect on it: 'This mental action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a mental action, you should reflect on it: 'This mental action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful mental action with painful consequences, painful results, then you should feel distressed, ashamed, & disgusted with it. Feeling distressed, ashamed, & disgusted with it, you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful mental action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

If something does not cause harm to one's self or to others, then from a Theravadin perspective it is morally acceptable. In my opinion the teachings of the Buddha offer many sexual minorities (such as lesbians, gays, bisexuals, and transgendered people) the clear moral teachings that affirms that they are not to be condemned.

"What do you think, Rahula: What is a mirror for?"

"For reflection, sir."

"In the same way, Rahula, bodily actions, verbal actions, & mental actions are to be done with repeated reflection.

"Whenever you want to do a bodily action, you should reflect on it: 'This bodily action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful bodily action with painful consequences, painful results, then any bodily action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful bodily action with pleasant consequences, pleasant results, then any bodily action of that sort is fit for you to do.

"While you are doing a bodily action, you should reflect on it: 'This bodily action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a bodily action, you should reflect on it: 'This bodily action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful bodily action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful bodily action with painful consequences, painful results, then you should confess it, reveal it, lay it open to the Teacher or to a knowledgeable companion in the holy life. Having confessed it... you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful bodily action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

"Whenever you want to do a verbal action, you should reflect on it: 'This verbal action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful verbal action with painful consequences, painful results, then any verbal action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful verbal action with pleasant consequences, pleasant results, then any verbal action of that sort is fit for you to do.

"While you are doing a verbal action, you should reflect on it: 'This verbal action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a verbal action, you should reflect on it: 'This verbal action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful verbal action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful verbal action with painful consequences, painful results, then you should confess it, reveal it, lay it open to the Teacher or to a knowledgeable companion in the holy life. Having confessed it... you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful verbal action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

"Whenever you want to do a mental action, you should reflect on it: 'This mental action I want to do — would it lead to self-affliction, to the affliction of others, or to both? Would it be an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it would lead to self-affliction, to the affliction of others, or to both; it would be an unskillful mental action with painful consequences, painful results, then any mental action of that sort is absolutely unfit for you to do. But if on reflection you know that it would not cause affliction... it would be a skillful mental action with pleasant consequences, pleasant results, then any mental action of that sort is fit for you to do.

"While you are doing a mental action, you should reflect on it: 'This mental action I am doing — is it leading to self-affliction, to the affliction of others, or to both? Is it an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it is leading to self-affliction, to the affliction of others, or to both... you should give it up. But if on reflection you know that it is not... you may continue with it.

"Having done a mental action, you should reflect on it: 'This mental action I have done — did it lead to self-affliction, to the affliction of others, or to both? Was it an unskillful mental action, with painful consequences, painful results?' If, on reflection, you know that it led to self-affliction, to the affliction of others, or to both; it was an unskillful mental action with painful consequences, painful results, then you should feel distressed, ashamed, & disgusted with it. Feeling distressed, ashamed, & disgusted with it, you should exercise restraint in the future. But if on reflection you know that it did not lead to affliction... it was a skillful mental action with pleasant consequences, pleasant results, then you should stay mentally refreshed & joyful, training day & night in skillful mental qualities.

http://www.accesstoinsight.org/tipitaka/mn/mn.061.than.html

If something does not cause harm to one's self or to others, then from a Theravadin perspective it is morally acceptable. In my opinion the teachings of the Buddha offer many sexual minorities (such as lesbians, gays, bisexuals, and transgendered people) the clear moral teachings that affirms that they are not to be condemned.

Sexuality in general is technically classified as being unwholesome or unskillful, but the Theravada school makes a distinction between acts that are unwholesome (anything based on attachment at all, so this also includes enjoying entertainment, food, etc...) and acts that are evil. Sexuality that is within the third precept (not using sex in ways that breaks up relationships, sexual taking advantage of people etc...) is understood as being acceptable for a layperson. Although this Sutta talks about abandoning all unwholesome states of mind, it was aimed at the Ven. Rahula who was a novice monk at the time. For laypeople one only must abandon evil actions.