In urban gay lore (at least) huge muscles are often accompanied by a tiny dick, so there may be some basis for this. [Other popular apocryphal theory: men with small dicks overcompensate by lifting weights.]
As for hb2's comment, about not knowing any gay men who work out -- I'm wondering where you live? I live in NYC and got a jolly laugh from your post.
I agree completely with what you said about the gay lore associating huge muscles with a tiny dick. I always hear that from gays as the main reason why so many of them are not attracted to muscular guys. That and simply aesthetics, as many gays just don't find it physically attractive or cuddly enough.
But like I said before, there are some exceptions to EVERY rule.
Also, NYC (or any other comparably large city) is not representative of all America, which is best illustrated by its suburbs and small towns all across the country. I do a great deal of national and international traveling for business and leisure, and I ALWAYS spend a lot of time in the gay communities all over, from large cities to backwater towns. I have seen firsthand that muscular guys who lift weights regularly and for a sustained period of time are no more prevalent among the gay population as it is among the straight. The contrary is just a common myth and a stereotype. This is true for mainstream America, and especially among most countries in Europe and Asia, where the thin, toned, male runway-model type is most highly valued among the gay population, again probably even more so than among the straight.