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Preference aside, I had read on another forum, which is also stated in the link below that Milk did not receive and honorable discharge. To name a Naval ship after someone receiving less that an honorable discharge is low enough.
www.kqed.org

The U.S. Navy Has Christened a Ship Named After Slain Gay Rights Leader Harvey Milk
Milk, the former San Francisco supervisor, served in the Navy during the Korean War but was discharged after being questioned about his sexual orientation.