Just FYI, and I don't mean to bust your butt here, but as a word "faggot" is equivalent in violence and malice with nigger, kike and cunt. Imagine you were chatting with a black friend and said "you're great, even if you are just a fucking nigger halfbreed." Or to a trusted female colleague you say "I think you do a great job; too bad you're a fucking bitch cunt and not a guy." You can say these things, and it's possible that they would be perceived as funny, but more likely they'd fall flat at best. They are violent words.
In the case of "faggot," you should be aware that this is the word you hear right before you're beaten by drunk homophobic thugs. Like virtually every gay person I know, I've had epithets hurled at me on more than one occasion. In virtually every case "faggot" was among them. I don't think you know this, but I was once assaulted on the street when I lived in Salt Lake City. The cops showed up before I got hurt, but I'll never forget the reptilian look of hatred in those men's eyes, and I've never forgotten the words they used. My assailants called me a faggot. I don't take offense at what you say to me because I know your intent, but I do want to do a tiny amount of consciousness raising here. When you use words in a joking way that are expressions of violent hatred you may evoke associations and memories in your listener that you do not intend. This happens even if the person knows you're joking.
Again, please don't take this in the spirit of reproach. I really just mean to clue you in to the way I and, I expect, others who have been on the receiving end of this kind of stuff react. We don't do this because we are thin skinned or politically minded or out to prove a point; we do it because of the context in which those particular words have been used with us in the past. It's an involuntary response, like shielding yourself from a blow. Anyway, I hope you can understand where I'm coming from on this.
He quit using those words.