The speaker in the song is hitting on a girl in a club. That's it. Let's Look at the lyrics:

"Breaking my back just to know your name
Seventeen tracks and I've had it with this game"
He's been talking to the girl for what seems like 17 songs (it is a dance club) and she still won't even tell him her name (Believe me, I have BEEN there).

"But heaven ain't close in a place like this
Anything goes but don't blink you might miss "

might mean that "heaven" , meaning his ultimate goal of sleeping with this girl, is not going to be achieved in a noisy dance club which is why he is trying to get to know her better and establish a repoire, so he can get her somewhere else, or perhaps he's just trying to get her number. "Anything goes but don't blink..." means that he's got to throw everthing he's got in his arsenal at her, she's sharp he has to keep on his toes to keep her from getting away.

"Bring it back down, bring it back down tonight
Never thought I'd let a rumor ruin my moonlight "

"bring it back down" is sort of slang for "reel it in" or "close the deal"

"Never thought I'd let a rumor ruin my..." She's confronted him with the 'ol "somebody told me you we a huge player..." line. This happens. you try and talk to a girl and suddenly some mysterious person as told her all sorts of bad stuff about you. Normally he can play it off but she's reall persistant with it and won't give him an inch.

"Well Sombodey told me that you had a boyfriend.." The "WELL" here his very important. It's sets the tone of the line as sarcastic. HE's responed to the aformentioned "player" accusation by saying some ridiculous rumor he suposedly heard about her. This is a common trick to hitting on girls, turn something they say about you around on them to make it seem silly. It's like if someone says "I met Michael Jordan" you say "Oh yeah, well my brother's cousin's sister's boyfriend once had a milkshake with Shaquille O'Neill"

"It's not confidential"- adding to the joke 'everybody knows about it'
I've got potential- can either mean he's starting to break the ice and get somewhere, or he's trying ot convince her to give him a chance.

"Pace yourself from me
I said maybe baby please "she's lightened up now but he's turned it around now telling HER to take it easy
"But I just don't know now "
When all I wanna do is try He's saying to her that he doesn't know if he wants her now that she's drug up all these rumors about him...but what he's actually thinking that all he wants to do is try and "bring it on back"

"A rushin', a rushin' around " basically just saying how he's going around in circles with this conversation."

Ok so maybe a little off there towards the end. but I think I'm MUCH closer that the "gay, crossdresser, butch-looking girlfriend" theories, which are a little too literal interperatations.