There are a lot of presumptions to untangle there, but the first and foremost, I think, is to remember that slash is a subset of media fandom. Therefore, even though it often deals with male-male sex, it does not aspire to appeal to an audience of gay men but rather to an audience of MEDIA FANS.
The way that second pair of questions is phrased ("where are the guys, and what are they reading?") there's an underlying presumption that if guys are not reading slash they must be reading something else. I'm not sure this is actually true, for a lot of different reasons. I think this betrays sartorias's bias, and it's one I happen to share as a reader/lover-of-books, but the sad fact of the matter is that most of the world is happy to watch TV/films without ever considering reading a piece of fiction, even if it concerns characters they happen to be otherwise fond of. There exist many media fans who read nothing more, and many men and women who do not identify as fans or take part in the COMMUNAL aspects of fandom, who likewise do not actively pursue reading, regardless of the level of zeal with which they might follow their shows of choice.
One of the curious things about slash--as opposed to traditional erotica--is that it is a communal activity.
This is, I think, one of the major differences between slash-fans and gay men when it comes to their respective consumption of male-male sexual material.
For gay men, erotic material is generally consumed as a sexual stimulus or aid to fantasy, usually during a sexual act (which could be alone or with one or more other men). It is generally consumed in a private as opposed to public space, which has to do not with the number of persons present but the nature of their interaction--putting a gay porn video on during a dinner party would not be appropriate for that sort of public/non-sexual space, unless it was for the intent of making fun of or ridiculing the film (which would defuse the sexual/erotic tension from being in the presence of sex but not taking part in it). Putting the same video on during an orgy (even with the same participants) is a different matter, since they are being invited to take part in the act of sex (regardless of what they actually do or not). Likewise, certain gay bars might have gay porn videos running on screens scattered about, to set the mood as it were, usually in the kinds of venues that encourage sex on the premises, through back rooms, glory holes, or simply spaces designated for sex-in-public.
One of the reasons for this circumspection in the male consumption of erotic material is physical awkwardness/embarrassment of getting an erection in a public/non-erotic space.
Also, there is an element of shame, where the underground/"dirty" aspect of said consumption is part of the thrill.
There is, I think, a similar underground "feel" to way that slash is produced/disseminated, in part because of its sub-legal status (being based on copyrighted characters), and in part because of the "transgressive" or "taboo" of its subject matter, that is parallel between how people who participate in these slash communities and how many gay subcultures (for instance, the leather community) work.
Whenever I see the way slash stories are codified, it reminds me of the infamous "hanky code" that emerged in the gay men's leather community a few decades ago, whereby one can "flag" an interest in certain (usually considered "extreme") sexual activities by wearing a hanky of a specific color in one's rear pants pocket. This indicates to other men who are also clued in to the code as to what sexual activities said man is seeking to engage in, and depending on whether the hanky is worn in the left or right pocket indicates whether he wants to perform said act (fisting, say, or water sports) or have it performed upon him. This code helps prevent pickup disappointments/incompatibilities, such as you picking up a stranger in the bar and bringing him home, all excited for him to put his fist up your rear only to find that he's expecting you to piss upon him, or whatever. (The nice thing is one can decide what one is in the mood for that night and flag appropriately, switching from "top" to "bottom" or between fetishes as the fancy strikes.)
I'm always reminded of Chip Delany's reaction to someone who asked if he wasn't embarrassed to write so openly in THE MOTION OF LIGHT IN WATER about his fetish for guys who bite their fingernails, and he replied that, on the contrary, he's hoping that any guys who bite their fingernails who read the book might then know to contact him.
And it's true that, the more specific one is in recognizing what turns one on, the easier it becomes to try and advertise for it.
The same sorts of codes exist in slash, so if you want to read Harry/Snape stories, for instance, where certain activities will take place (or at least a certain level of explicitness) there are all sorts of ratings and indicators to signal that the story in question will touch upon those hot spots for you.
What is not similar at all is how these stories are shared between slash fans, commented upon (in private and in public), responded to in turn with other stories as reactions, etc.
Gay men certainly engage in the sort of locker-room bravado as heterosexual men, talking about how many times they had sex, with whom, how big his dick was, etc. But it's all ego-driven, in a way. Much rarer would be for a gay man to say he jerked off to a really good story the other day, and to recommend the story to a friend. Which isn't to say that a gay man might not lend a friend a new gay porn video he had bought, but there isn't the type of analysis, commentary, meta-commentary, etc. of the material the way that there is within the slash community.
I think that another big difference between slash and general-male-reactions (regardless of orientation) to media stars is that men tend to fixate upon an individual, whereas slash is very often about the DYNAMIC of a certain relationship or pairing. There are exceptions to this, such as the "daddy-boy" stories in the gay male community (the magazine HANDJOBS being the best-known venue for such) or the voluminous (het or gay) material about deflowering "virgins."
Since "sex" is, in general, less taboo in gay male subculture (after all, it's the element that separates us from heterosexual mainstream) oftentimes this fetishization of media stars happens with porn actors. In fact, in the past handful of years, gay porn companies have come out with a line of signature dildos modeled after the members of their super-star performers. But this sort of fetishization is a private sort of thing, the same way that a heterosexual man who has the hots for Pamela Andersen might have posters of her in his bedroom, but is not likely to write erotic stories about her and email them to friends he might never have met in person but who share his erotic fascination with Ms. Andersen.
Women are more likely to indulge in shared idolatry, whether this is Beatles-mania or sighing with one's best friend over Matt Dillon (I'm dating myself, I know, but I've no idea who the current young heart throbs are?) or reading in some celebrity magazine about Brad Pitt's favorite color. (A straight male usually doesn't care about the humanizing details and real-life minutiae of the actress stars of his fetish, so any "shared" idolatry with pals is usually along the lines of what each of them would like to do in bed with Julia Roberts and not an extended discussion of whether she would prefer to go to the opera or the ball park as a first date.)
This has gotten a lot longer than I anticipated, and I've also strayed a bit afield, I know.
But in some ways, the question is not "where are the guys, and what are they reading?" but rather, "why are women compelled to write and share these stories whereas men are not?"
And some of the answer to that comes from how men and women tend to consume erotic material differently.
Some other possible answers to "where are the guys?"
Looking at the question from our shared perspective as SF/F writers (in the case of sartorias and I, not to mention many on my lj-friendslist), one of the major ways men participate in similar types of communal fandoms is role-playing games. This is also one of few spaces where it's culturally permissible for a straight male to engage in a similar sort of gender exploration (for instance, Johnny Q. Fan is, in this game, a female half-elven thief...) even if it's usually pulled off with all the lack of finesse of a Jack Chalker novel (where, in almost every one of them, a man winds up in a woman's body and NOTHING changes in how he/she acts/reacts/moves/etc.)
I think the competitive nature of role playing games is an additional attraction for men, making it more appealing as a communal fandom.
There are, in general, very few gay men who are involved in SF/F fandom. Of course, there are other gay or queer spaces that fulfill many of the same social functions that fandom provides for many people. (Instead of needing to attend a con in order to get dressed up as a warrior princess or their favorite Klingon, gay men have plenty of opportunities to indulge their sartorial whims: aside from simply going out to a club in the latest styles and fashions, gay men can head over to a leather bar dressed up in chaps and a harness, or in a military uniform if that's how their fetish runs, whenever the fancy strikes them. And that's not to mention the unbridled exuberance of gay pride marches and the outlandish outfits and costumes many queers choose to wear...) (And of course, the ones who still need more venues in which to dress up become costume designers for some local theater group or start a clothing label... ;->)
There are also plenty of SF or Fantasy themes within gay male culture--books, comics, etc.--that doesn't ever cross over to the genre world. Gay vampire novels, queer super heroes, erotic space comics, etc. all of which taking for granted that the audience is comprised of primarily gay men who'll catch all the gay-subculture-specific references, without needing to explain them.
This is the same sort of shared-experience that slash-writers depend upon: that their readers have watched/read the show/book in question and are therefore familiar with the basic characters, concepts, etc. So a slash-writer doesn't have to explain, for instance, who Starsky and Hutch are, and the fact that they shouldn't ordinarily (in the rules of the orthodox show) be having sex with one another... The reader already knows all that, and many other details besides.
Where are the [gay] men, and what are they reading? As mentioned above, many of them are not reading. Especially not the ones who prefer other forms of media. Back when I was coming out, books (and queer bookstores) were major elements in gay community, coming out, etc.
Nowadays, there are so many representations of gay life on TV, gay men don't have to look to books to find their own lives and realities reflected in culture.
I'm running out of steam, so will just stop here, even though there were half a dozen other points I meant to get to. Another post. And if there are specific things you want to know more about, or which I didn't explain sufficiently above, just let me know in a comment and I'll try and tackle in another post.