I think that most people use the word homophobia to mean 'anti-homosexual bigotry,' not its cause. I agree that there's an unfortunate psychologizing connotation to it (due probably to its medical origin, as your friend helpfully notes), but you have to admit that it's shorter than 'anti-homosexual bigotry' or even 'anti-queer bigotry.'
>The 'medicalisation' of homosexuality means that for a long time
>homosexuals have been stigmatised as (and often believed themselves to
>be) sick, inadequate and self-destructive individuals. The discovery of
>homophobia appears to turn the tables: where once it was the lesbian or
>the gay man who was diseased, now it is the 'homophobe'; where once
>psychiatrists assembled character traits to come up with the 'homosexual
>type', now they can be gathered to form the 'homophobic type'. The
>homosexual can triumphantly tell the bigot - 'You are screwed up because
>you think I am!'.
Butler might have a queer activist say instead, 'You think you are because you think I am!'
Yoshie