I think that Garak was likely gay or bisexual. However, I am not sure what his degree of interest in Bashir really was, in that way--whether he used behavior that could be taken as sexual advances as a means of throwing Bashir off balance, or if there was anything there.
As for Bashir, I see nothing that suggests any interest in men. One would expect that someone as observant as an Obsidian Order agent would notice that. Which leads me back to the deliberately unsettling/manipulation theory, a ploy to keep Bashir guessing about Garak's objectives.