First off, I like your example, it embodies the core dynamic that people refer to when discussing hate speech vs. free speech.

  Does this boss really deserve a debate and an exchange of open ideas?

YES. Both the employee and the boss in this situation need to sit down and talk about it. Even if the boss is of the rough, conservative demeanor, he can be very receptive! You must simply approach the boss without a chip on your shoulder, and be very respectful. Any man worth his salt will reconsider their position after this. Express yourself fully, express your existing and continuing respect for the boss, and watch as he becomes reasonable. For this is the core tension between the liberals and the conservatives: There is no respect given to each other before both sides begin to engage.

  If you tell them you disagree and they just continue mocking gay people, what are you supposed to say or do?

Well, that depends on the outcome of the discussion you two had. Did you come out of it friends, with a stronger relationship, and mutual understanding? Then the boss probably is just being careless in his use of homophobic slurs, and dare I say the onus is on the gay person to restrain their disdain - and such restraint should be easy, because you respect and are friends with the man uttering slurs. You know that he is your boss, your provider and guide; you know that you can approach him honestly and be safe from retaliation, so why would you feel fear in this situation? You should feel nothing at all if not slight irritation.

Now, suppose you come out of the discussion about homophobic slurs, and the boss was not at all receptive. Perhaps he uttered a slur to you as you left. Then you must leave the company, and rightfully declare him a homophobe when appropriate.

Let's get to the meat of the issue. Do you pre-judge your slur-uttering boss? Do you assume him to be homophobic, and begin attacking his character in all avenues? Do you never attempt discussion, instead tweeting about how he's committing hate crimes?

Or. Do you approach him honestly with your guard down, to admit both your sexual orientation and your devotion to your job, while requesting that he try and restrict his use of the word ft? Do you listen silently while he riffs against political correctness, nodding and acknowledging, until he comes around and apologizes for making you uncomfortable?

You may take the path of the coward, or the path of the hero.