Let me get this straight. Your friend's mere touch and his sexual escapades whilst in the room next to yours, sexually arouse you. You think of gay sexual acts as you masturbate, or once did because it arouses you to the point of having an erection. However, you clearly state that you are not gay yourself? This doesn't make sense, unless, that is, you're suppressing your sexuality in some way. Which, when I think about it, was me some many years ago.
You see, I used to have deeply sexual thoughts about women when I was younger. I found myself enjoying the mere sight of women naked, or in next to nothing. It was hard because, as a woman myself, I felt I wasn't supposed to be attracted to them. I struggled deeply with who I was, and where I fit in this world. There would be nights where I would repeat the phrase "I am not a lesbian" over and over again, as if trying to demand that those sexual thoughts of them would leave my mind forever.
Only recently did I let go of all the inhibitions and decided that, hey, I am sexually attracted to women, and you know what? It's alright. It's normal. I felt so liberated and free for the first time in my life. I'm not some weird sicko, and neither are you. I assure you that being sexually aroused by gay thoughts and such is perfectly normal. Nothing "wrong" about it.
Suppressing your sexuality is like trying to convince yourself not to eat your favorite dish, because no one else you know would like that dish, and you just want to fit into their social norms. Okay, maybe that analogy is sort of stretching it, but you get the idea. You can't just decide to be one sexuality. No one decides who they are attracted to and who they love. It's just the way they are, who they were born to be.
Now, you have two decisions, either embrace yourself for who you are and feel as free as the wind blows, or stay in denial and keep on trying to be someone you're not, no matter how many times you tell yourself you are that way. What will it be?