Well, they did make a point of having Clem call him "queer". Twice. That seemed to me to move Ianto more firmly into a certain box for the audience, regardless of what he told his sister.

Unless of course, Clem meant "queer" as in weird or wrong and Ianto will revive for some sci-fi reason after the mortician walks by him with a hot cup of java. Only he'll be so pissed at Jack for giving up on him (and, let's face it, coming up with a really s****y plan) that he won't bother hooking up with Team Torchwood again.