Less as a punishment, more because he had a bit of an ego.
The 'punishment' part was basically that he acted like an overdramatic fop (I'd rather not use the term fag) around Pat Patterson not days before he was supposed to start his first bout.
He wasn't just kept at it because he was good at it - there were several attempts of seperate him from the character - he also really enjoyed himself as Goldust. Not to mention he was making a decent chunk of change in likeness rights. Goldust was a popular character.
A character conceived so that burly rasslin fans could blow off some "no homo" steam as they sat around the den together, watching oily men in tiny trunks grapple.
The thing about Goldust is he never failed to get a reaction out of people. People either loved him or hated him. Nobody ever went "Ah, he's okay, I guess."