They are allowed to serve as long as they don't bother people with their sexual problem at work. Who cares what they do in their private life. Don't bother military with it, or you have a problem.
Plus, your statment taht there is no problem does not match what i have learned from other military guys. They take expection to a flamer who finds it necessary to bother them with their sexuality - like staring and flirting with them. As long as they don't mess with others, no one cares. But mess with others and it makes for a problem. Normal reaction of men.
My husband was a submariner through the 90's. While discussing with him the "Don't Ask, Don't Tell" policy, he told me there was a gay guy on the boat and that no one had a problem with that. The guy did his job, they felt he was trustworthy. End of story.
My husband respected the man enough to refuse to say anything more to me about it. He didn't want a decent guy getting in trouble because of something I might say.