I had the same question - I never really listened to Traffic growing up, but last month WXPN - 88.5 out of Philadelphia (one of the great adult alternative radio stations - they actually created the genre; their "World Cafe with David Dye" show is broadcast nationally on NPR) put together their top 885 songs of all-time as voted on by listeners - an amazing list - go to www.xpn.org
and find "Top 885 of All Time" link - you can save it as a pdf.
Low Spark of the High Heeled Boys was #33 and as I listened to it, I thought - whoa, what a great song, and what does it mean? I don't think it's a gay reference - wouldn't make a lot of sense given the times (1970); I do like the ideas that relate to Michael Pollard below - and there seems to be a sense of how folks of the time were trying to capitalize on this spirit, which would have been the complete wrong thing to do.
Despite what it means, what a great line from a great song.