In “Could Have Danced All Night,” the entire poem seems to use positive language, until we read the last line "planted painfully like a flag". The poem talks about dancing and wanting the other person, but the last line makes me think he is in pain and unable to dance because he is stuck. Why was the character expressing "pain" and "being planted" instead of being free and pain-free?

Ian Iqbal Rashid's poem "Could Have Danced All Night" tells of the speaker's dream to be held "knowingly" in the arms of a man. While the language of the poem's first segment (the section to which the question is posed) is positive, the final lines denote a negative tone. The idea that the speaker finally finds himself dancing in the arms of a man, something he has dreamed of, is inherently positive—that is, until readers come to the final lines:

Tonight I would dance with you across an alien landscape.
We might fly. ("I'm positive.")
But this night finds our legs rooted, knotted,
planted painfully like a flag. ("I've tested positive.")

It is here where the poem's tone changes. Instead of being happy that he has seen his dream come true, the speaker is sad because he has tested positive. This, most likely, is a reference to having tested positive for HIV/AIDS. The speaker wanted to dance all night, living life within his dream of being in another man's arms, yet he feels rooted to the ground, unable to dance, because he has tested positive for HIV/AIDS. Without the positive test, he could have flown (figuratively). Now, with the positive test, he is unable to dance freely (figuratively).
The initial statement "I'm positive" could refer to the idea that the speaker is positive that he could fly freely with his partner. He is positive that their relationship possesses a positive connotation in life. But the reiteration with the addition of "tested" changes the meaning completely.
In the end, the positive test has changed the speaker's life forever. The poem continues with the speaker addressing the fact that the man he had been dancing with leaves, most likely the result of the test. The speaker is, therefore, rooted to the ground while his partner leaves. It is the speaker's diagnosis, not the other man's. This diagnosis, then, leaves the man rooted to the ground, "painfully like a flag."
The flag could refer to the idea of homosexuality and flag-waving. Because times have changed, many gay people proudly wave or display the rainbow flag. The fact that the flag is "painfully" planted could refer to the idea that although the speaker has "come out" as a homosexual, he possesses the stereotypical curse of homosexuality (AIDS/HIV). Therefore, while the planting of the flag should be a positive and hopeful event, the positive test makes his "coming out" painful.