if you want the summarised problem as I see it, then Feelgood is saying in very straightforward terms that he suspects the boy is in fact gay.
The fact he comments that the boy's family won't acknowledge it, can just as well mean that he is concerned their unwillingness to at least consider talking to the boy about it, could seriously hamper and further confuse him as he goes through adolescence.
So there
But I think it's a bit early to really label him gay at age 12 though. Effeminate perhaps, but that still doesn't mean he's gay without a doubt. So my advice would be to lay low on the subject a bit more. And if you really do care for him and accept him like he is, make sure to be there for him when he needs somebody to talk to, that's all I can say