The noun could be offensive but I have never heard anyone use it as a noun except in old books and film. The adjective is not offensive. Don't use it until you know how to use it. Many people in North America use it as part of the phrase' fine and dandy' which means everything is fine or good. Did you hear? Jenny just bought a brand new car! Well, that's just fine and dandy! She borrowed five thousand dollars from me last week and told me she would pay me back yesterday. We usually use it sarcastically. We also use it by itself in place of 'fine and dandy' That's just fine and dandy. That's just dandy. Is that just dandy?

Used as a noun, it seems somewhat archaic to me but its use as as an adjective is still current, although probably not really common. Expressions like ''fine and dandy" are still used occassionally by my generation. I have no idea whether or not younger generations still use such expressions.

It sounds just dandy to me. Who on earth told you it sounded gay?!

yes you can^^

I saw that word used a lot in Japan, such as on billboards, and it left me puzzled since no American I know uses the word, including myself. I'm familiar with the traditional expression "fine and dandy" that DancingBear mentioned above, but I associate that with the era of black-and-white movies where a guy might actually get away with saying something like that and not embarrass himself.