Aww, I love you guys so much! It's like you read my mind, cuz I was thinking about this topic ealier today. XD
My theory is... Greg is bi, leaning more towards men. Nick is gay, but can't come out to his parents because, like a couple of you said, it's a Noah-esque situation.
Nick was raised in Texas. A state that doesn't widely accept homosexuality. So, Nick was completely expected to grow up like a good ol' boy; chasing girls, playing football, going Greek, all that stuff. I think the boys tried to get together earlier on in the show or at least they were flirting like crazy off-cam. Anyone remember 'Friends and Lovers'? the whole 'Where's Nicky?' scene. And then Sara gave him this look like she just knew what was going on and makes her little comment. But then later on in the ep, Catherine said something about 'maybe they didn't have any other choice' [referring to the lesbians. she says something else too, I just don't remember.] then she gives Nick this look like 'you need to take care of this thing between you guys before something bad happens' and Nick looks thoughtful about it.
I think that's why he went and had sex with Kristy. To try and prove to himself that he could be with a woman. But it didn't work because he still has feelings for Greg. So, he tries harder in season two and they get together for awhile, but for some reason it just doesn't work out and they break up around beginning of season 5.
And then in season 6 & 7, we see Nick subtly trying to win Greg back, but Greg has gone all big-man-on-campus/horny frat boy for some reason. It's confusing to them both.
I don't know. Maybe that's a really FAR out stretch, but... anything's possible, right? And if I'm totally wrong about the above stated, it's because I haven't seen anything in season one passed 'Unfriendly Skies' in a long, long time. XD