This is an interesting question, and the answer is kind of "both".
Röhm (and some of the SA leadership he surrounded himself with) was gay, although he described himself as bisexual in a number of police interrogations during the Weimar years. He faced charges for violating Paragraph 175, the Republic's anti-homosexuality laws, but was acquitted five times, and advocated for legalization of homosexuality.
Speaking a bit more broadly on the topic of Röhm's sexual orientation, he cultivated a hyper masculine attitude/persona, in part to counter the prevailing attitudes at the time that homosexuals were effeminate. Think "leather daddy" or "bear" in today's terms.
Röhm's sexuality was common knowledge among senior Nazi leadership as early as the 1920s. He was, by the standards of the time, fairly open about it. Röhm's sexuality was tolerated by Hitler when it was politically expedient to do so, as Röhm was one of his most loyal and formidable allies. In 1932, Röhm offered to resign so as to not bring disgrace on the party, but not only did Hitler refuse, he went on to state that Röhm's sexuality was of no relevance the following year. Depending on the critic, Hitler varied between denying Röhm was gay, stating he "used to be" but wasn't anymore, and flat out stating that as long as he didn't molest children the issue didn't matter. This tolerant attitude spread to the rest of the SA, which didn't police their members' personal lives to the extent that the SS did under the notoriously homophobic Himmler. As you may be aware, on the Night of Long Knives, Breslau SA leader Edmund Heines was discovered in bed with an 18-year-old senior troop leader (they were both executed).
Once Hitler decided to purge Röhm and most of the SA leadership in the Night of Long Knives, they used his "degeneracy" as further propaganda supporting his murder after the fact. I can't say for sure, but I would link the abandonment of any Nazi pretence for tolerance of homosexuality (among supporters, at least), with the purge of the SA and the growing supremacy of the SS, though of course they had been persecuting gay people in the rest of society prior to this.
TL;DR: Röhm was definitely gay and pretty open about it. Hitler didn't care, until it was politically expedient to use as propaganda to justify the purge of the SA.
Suggested Reading: