I'm from Pennsylvania. With the recent threat by the Westboro Baptist Church to protest the funeral of seven children who perished in a fire, I've been thinking a lot about their infamous catchphrase: "God Hates Fags." Religious debates aside, when did "fag" become an offensive word?
According to the online etymology dictionary that I use, "Faggot" came into usage in 1914 and "fag" in 1921. Prior to that definitions included a bundle of sticks for faggot and cigarette for fag.
Fag (with the meaning of a male homosexual) has been used since 1920s as short for faggot.
As for faggot meaning male homosexual, the Online Etymology Dictionary has the following notes:
American English slang, probably from earlier contemptuous term for "woman" (1590s), especially an old and unpleasant one, in reference to faggot (n.1) bundle of sticks, as something awkward that has to be carried (compare baggage "worthless woman," 1590s). It may also be reinforced by Yiddish faygele "homosexual", literally "little bird." It also may have roots in British public school slang noun fag "a junior who does certain duties for a senior" (1785), with suggestions of catamite, from fag (verb).
The explanation that male homosexuals were called faggots because they were burned at the stake as punishment is an etymological urban legend. Burning sometimes was a punishment meted out to homosexuals in Christian Europe (on the suggestion of the Biblical fate of Sodom and Gomorrah), but in England, where parliament had made homosexuality a capital offense in 1533, hanging was the method prescribed. Use of faggot in connection with public executions had long been obscure English historical trivia by the time the word began to be used for "male homosexual" in 20th century American slang, whereas the contemptuous slang word for "woman" (in common with the other possible sources or influences listed here) was in active use early 20c., by D.H. Lawrence and James Joyce, among others.