Roddenberry talked a lot and made tons of empty promises, I don't believe he ever truly intended to have LGBTQ characters on TNG, he easily could have if he wanted to, lots of shows in the 80s had them, it wasn't common but also not unheard of so I doubt the studio would have stopped them.
Blood and Fire was a bad script judging by the fan film that was ultimately produced. I don't know how much it was rewritten when it turned from a TNG script into a TOS script but the story was atrocious. There's a gay couple, one of them gets space aids which means he and all the other infected must be killed (WTF?!) and after a lot of back and forth he dies and his devastated partner leaves the ship. Complete and utter crap and it was rightfully rejected for being an awful idea and had it been made as a TNG episode it would have been seen as offensive. It's literally burying the gays and also completely falls flat as an AIDS allegory because it portrays the infected as a danger to society.
The script was probably awful but I am guessing the idea was to offer commentary on the AIDS virus. If it was made I bet it would have ended up being something like "Code of Honor" were they think they making something progressive only to come out offensive because of 80's attitudes at the time. Remember even progressive people in the past were not always progressive by modern standards.