Explaining the gay dad and Peter touching Angela flashback/dream

This is for the "flashback" scene with the father and his gay lover and Peter pointing to Angela. This seems to be a pretty big topic with many people saying different things from Peter and the real Angela having an incestious relationship to the scene being nothing more than a dream. I however have interpreted that I believe explains not only the scene but provides a deeper meaning for it and an explanation for having it in the movie:

For years Peter was raised to be Angela. His aunt warped and twisted his mind so he would think and act like a girl, even believe himself to be one. Based on his feminine appearance, it's even possible she was injecting him with female hormones.

From what I gathered, he liked Paul. In what sense, I'm not entirely sure, at least not at first. Perhaps he interpreted this "like" as the romantic source since he thought of himself like a girl, and girls were supposed to like boys in that way. Thus was behaving in how he believed a girl would behave with a boy they liked, i.e. the flirting and kissing.

During the time when he and Paul were making out, Peter/Angela has a flashback to having seen his father with a gay lover. He was probably relating to that moment since he himself was developing feelings for another boy and enjoying the make out session. I guess you can say that Peter/Angela had two identities (NOT a split personality). He thought of himself as both Peter and Angela. "Peter" was not into boys, but "Angela" was, and until he began developing feelings for Paul, that lack of attraction to boys was the only thing preventing him from no longer thinking of himself as Peter and only thinking of himself as Angela.

Coming to the realization that he was now developing feelings for a boy, something that as Peter he never had or would have had, he was crossing the final threshold of truly becoming "Angela". This explains the scene with Peter and Angela in bed and Peter slowly reaching out to touch Angela. It was symbolic of him making the transition completely, losing his identity as Peter and embracing his identity as Angela.

This is understandably very traumatizing for the Peter side of him. This is why, in the vision, just before Peter touches Angela, thus "becoming" her, he freaks out in the real world and pushes Paul away. It was a last ditch effort to push away the Angela side from completely consuming him and clinging onto whatever remained of his identity as Peter.

At the very end of the movie, when Peter/Angela were on the beach, and he tells Paul to take his clothes off, I think he was giving Paul the chance to see who he "really" was, i.e. Peter, and perhaps hope to be accepted as he was, not purely as Angela. It's safe to assume that Paul was repulsed by this truth. This rejection of his identity as Peter likely caused him to completely snap. He was already pretty crazy, but this was the final straw that drove him to complete madness.

As we saw from the sequels, there seemed to be too little of "Peter" left in him, and the doctors decided that the best way to help him was to have him completely embrace his identity as Angela, so they gave him a sex change operation. And while this did seem to help (or at least preserve his sanity enough so that he wasn't rabid animal straight-jacket crazy like he was at the end of the first movie), it wasn't enough to make him sane.