To start, I believe it to be telling that Butler has discussed (not in this writing, but in other writings) that she had been referred to as a queer theorist, or at least a contributor to queer theory, before she was actually comfortable with the use of the term "queer". For Butler and many others, use of the term queer is problematic given the history of violence in its use against LGBT folk. Butler now uses this term in writing and has changed her position on the ability of communities to redefine terms, or as she states in Gender Trouble, to pick up old tools and infuse them with new life.
Butler and Kathleen LeBesco use the terms "fat" and "queer" in similar ways. Both terms have previously been used as means of insulting and controlling communities of folk with non-normative genders, sexualities and bodies. Through reclamation of the terms "fat" and "queer" by those communities whom these terms have been violently directed, the meaning of the term has the potential to shift from one of violence to one of empowerment. By this I mean to suggest the term has the potential to become a self-determined identity, as opposed to an assignment (an othering). We have little control over how others see, interpret, and interact with us. However, we do have control over how we identify and our chosen families.
"Fat" and "Queer" are politicized terms that have become rallying terms for many seeking to redefine community and family. This is the taking up of a term, reinvesting it with new meaning and taking some of the power away from the term's historical violences, and then the building of family and community through similar identifications. While this process is useful, it is important to note that "fat" and "queer" are both still used as terms for insult.
In John Waters' film, Female Trouble, Divine's character Dawn Davenport runs away from home and finds a new family. While wonderfully disturbing, Davenport's new family, the Dasher's convince her that she is beautiful not despite being "fat" and having a disfigured face after sustaining an attack by Aunt Ida, but because of. This is subversion, not simply a reclamation of terms in order to reconstruct meaning, but through taking societal norms of what is considered to be attractive and fabulous and rejecting it. I do not think that this process means the Dasher's have rejected normative conceptions of what the dominant society believes to be attractive. Rather they have broadened the definitions. This bond proves to be tenuous, as the Dasher's eventually cut their association with Davenport by stating that she is deluded, thereby siding directly with dominant society. Davenport remains unfazed and has internalized the Dasher's previous assertions believing she is not only beautiful, but someone who is famous and for whom all interactions and situations she finds herself in offer the potential for increased fame and desirability.
This is a very good explanation of how reclaiming words that have previously been harmful can be an empowering act. However, I do agree that it can sometimes be problematic, because though the words are being reclaimed, not everyone knows that they are, some people still see them as just an insult. Your interpretation of Dawn and how she has internalized what the Dashers have taught her is also very interesting. It seems that being brainwashed about what makes her beautiful is what drove her completely insane in the end.