That's also a really wild thing to do, even if Fort Gay didn't exist. Worst-case, it's some teenager who thinks it's very funny to say the word "gay". Not worth a ban.
But it could just as well not even be a slur, if it was an actually gay person laying out their affiliation. Or if it was used with its original meaning of 'happy'.
And Xbox Live is a paid service. Not providing that service to someone who's paid for it, without an actual reason, that's just theft.
XBL's auto-censored word list was (and maybe still is) wild. If you have any PC ports of Xbox games from around the 360 era, there is a chance the plain text file that contains the list is in the installation folder somewhere (IIRC, Dark Souls Prepare to Die Edition has it). Bans were usually automatic if you had any of those words anywhere in your profile, and it included "gay."
You also couldn't put shit like "Halo sucks." You could put "Mario sucks" or "Sony sucks" but any disparaging comments about Bill Gates, Microsoft, or any of their IPs would result in an error.
Working for Xbox this list was so God damn funny. It's not just words like "shit" or "fuck" it's the various permutations someone might use to get around the filter too so you just see things like "hitler", "hiiiiiitler" "hitttttttler".
