Di (dye) = Opposite (in this case the opposite of fake = real);
Psudo (sudo) = Fake (these two put together do nothing but make the word longer, but as most people know, the longer the insult the better);
Poly (...poly?) = Many (in this case implying he/she gets around);
Gay (Gai!!) = Gay (as in "Ur Gay LOL!!")
Ist (Is+t said like a german would) = One who is (in other words "Ur Gay LOL!!")
Insultist Contestant 2: "Your Mum/mom is Gay!"
Insultist Contestant 1: "Your Mum/mom is Polygay!"
Insultist Contestant 2: "Your Mum/mom is Dipsudopolygayist!"
Insultist Contestant 1: "Err..."