I know basically nothing about who actually looks at the apps that get submitted. Nor do I know anything about what apps typically get rejected. I've never worked with the App Store personally, as a developer or a consumer. But I understand developers should expect a time period of anywhere between an hour and two weeks before getting approval, during which presumably a human looks at it, right?
I just can't imagine any adult of sound mind and typical socialization (and presumably having gone through training that explained what Apple's internal policy is toward app approvals) wouldn't realize that that app is offensive. Thus, the only explanations I can come up with are either a) whoever approved it genuinely didn't notice its content (possible but highly unprofessional and careless, to a degree I normally wouldn't expect from a company with Apple's reputation) or b) Apple's famously stringent approval policy contains nothing that forbids this content.
Hell, it's possible I'm expecting more stringency from them than actually exists. Most of my knowledge of the App Store comes from the tech press. But there's no getting around the fact that a human looked at this and approved it. We are thus in the second scenario you mentioned: someone has seen your pants and very likely your unbuttoned fly, and the situation has not been rectified. Consequently, I feel I do have standing to hold Apple accountable for this, and as you say, more so because of their apparent position in the past in support of their LGBT employees.