Well, to the credit of older games, they might have lacked a level of emotional maturity to handle the content, but at least diversity was there without a fight. Final Fight's Poison, Birdo were transgender, and EarthBound, Chrono Trigger and Final Fantasy 7 all alluded to lgbt themes.  Really, I think most of bad will came from the PS2 era where GTA treated homosexuality as a punch line and it was a trait of psychotic villains like Vamp, Alfred Ashford from Resident Evil. I think the only positive examples of LGBTQ console games from that era I can think of off the top of my head from that era was Bully and Fable. Current Gen and last Gen, there's Trevor from GTA5 was bi if i recall, and I don't know if Trevor is considered progress. There also were rumors about the two main characters from The Last of Us; both could be interpreted to have been in a gay relationship at some point in the game. Not that sexuality matters when faceless vagina faced nightmares are threaten to devour your head at almost any given moment.

I think its one of those situations like, all terriers are dogs but not all dogs are terriers. Being on the dl could mean their closeted, or it could mean they are in a relationship, or don't want friends to know about their promiscuity, or even used as a way to heighten fantasy elements.