Since roughly 9/10 of the population still identify as straight, I don't really think it's wrong to assume that someone falls into that category. To me, it's the same as assuming that someone doesn't have cancer or assuming that someone doesn't play D&D. I'm not saying that there's anything wrong with being gay at all (hell, I'm starting to think I swing a bit that way, myself) but it's definitely not the social norm by a longshot.
Likewise, I won't take offense if a gay man flirts with me. I will politely tell him that I'm flattered but not interested. I would expect the same courtesy if I ever flirt with a gay woman. We've all hit on someone who wasn't interested or been hit on by someone who didn't interest us, so why should the person's genitalia really change the situation that much?