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Directs the Secretary of Defense to modify the guidance and terms of reference issued in connection with the establishment of a Department of Defense (DOD) working group tasked to conduct a review of the possible repeal of federal law containing the U.S. policy concerning homosexuality in the Armed Forces (commonly referred to as the Don't Ask, Don't Tell policy). Requires the final report of the working group to include an evaluation of: (1) whether the current policy is significantly undermining military readiness; (2) whether its repeal will significantly improve military readiness; and (3) what implications for and effects on military readiness, cohesion, morale, good order, and discipline are entailed as a result of its repeal or amendment. Outlines expanded report objectives, including determining the policy's effect on recruitment and manpower requirements. Requires the Secretary, after the final report of the working group, to report to the congressional defense committees on the working group's report and recommendations, the Secretary's conclusions and recommendations, and the comments and recommendations of the chiefs of staff of the military departments.

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