But are we obligated to submit to arbitrary judgements of appropriateness?
Yes. The public entity as a whole agrees on what is appropriate and what is not. If you don't like being a part of the public, then you've got every right to leave.
An event official for a state run organization at the fair made this call, likely after consulting with others and hearing complaints.
Homosexuality is still a crime in some countries and if your plan is to go there and fuck in public to prove some kind of point then I strongly advise not to.