Quote 1
After a block, [Paul] said, "When we had that fight I was really hurt."
"I'm sorry I called you a f*****. I know you're not."
"But I am." (21.84-86)
Ultimately, a big part of Tales of the Madman Underground is the characters coming to a sense of acceptance of who they are and deciding to own up to what they can't change. In this case, Paul is gay, and that's really the end of that story. It's funny how Karl tries to tell him he isn't even though both of them know otherwise. Just as Paul set an example for Karl when they were kids, he's now showing Karl how to gracefully accept who he is.
Quote 2
"Karl, you're such a baby. Grow up. It's a therapy group, okay? A therapy group. Where they put weird loser kids. We don't have some kind of mystical magical Madman mystique. It's not the club where all the geeks get to be special. What it is, is where f***ed-up kids go." (15.93)
We know Paul is trying to run his own version of Operation Be Normal, but there's something in this passage that tells us he's trying to convince himself of all this more than he's trying to convince Karl. Remember, Paul doesn't really want to leave the Madmen—which means he probably needs to preach to himself about it even more.