Waterloo is actually more commonly used as a synonym of defeat rather than victory, as it was at Waterloo Napoleon got beaten - Which would mean "You're my waterloo" would rather mean "You're my only defeat". He's saying that, maybe because Carlos really got close to Pete then really hurt him - Pete doesn't normally let people get close enough to him, because then he can not be hurt. So maybe, he means that Carl and the things he did, was Pete's only defeat. The first time he let someone in, was the first time he got hurt, therefor he will forever have problems doing it again - just as Napoleons confidence was reduced after the battle at Waterloo.
And as for Carl and Pete having a sexual relationship has been denied by both parts - If you say you don't trust their words, then you can't trust the songs and it all will mean nothing at all to you