Should I take this as my best friend reacting well or poorly?

To me, it seems like him asking you about who you like or think is attractive is him trying to show you he's okay with it and wants to hear about it- maybe the awkwardness is partially because you are hesitant to talk to him about things related to you're possibly being gay because you're worried about how he will react and he's sensing that hesitation from you. If you were two straight guys I'd bet you would talk about cute women from time to time- I think his asking is nothing to be concerned about.