The question is about the nature of privileged language: there's no law against the word, but there IS a great deal of cultural pressure around it, that's both contextual and rather personal. And it's not just language, but the whole context and and cultural relevance.
This reminds me the strange phenomenon I've observed, witnessed and experienced as an Asian-American.
Within the AA community and culture, it is an insult for anyone to call an Asian by anything from "chinks" to "slit-eyes" to "yellow face." And all cultural references that equate Asian with "rice," "dragon," "fortune cookie," "chop suey," etc. are to be frowned upon.
And yet, guess what? Asians are the first to use these lexicons, symbols, references to identify themselves. They even revel in them. I've lost count on the number of bands, artists, writers, musicians who call themselves and their work something "dragon," "rice" or, the latest I've heard, a comic book about Asian superheroes called Y-Men -- a take on X-Men and the Y stands for :Yellow."
I was like: WTF? Are we pushing this "take back the word" thing a bit too far? Why is every Asian band or theater troop called "Dragon" or "Panda" or "Firecracker" or "Rice" something? Why is it cool to call yourself Yellow-Men?
I find this phenomenon both interesting and alarming. How do you fight stereotypes when you yourself perpetuate the same stereotypes?
To me, language has its fundamental meanings and history, and yet it is flexible and breathing with contexts, cultures, and the key here is communication. The who and what and how and why and where. I could comfortably call my friend a name and there is absolutely no disrespect on my part, and yet I don't think I can bring myself using the same word in public, or even behind someone's back, in which case there's no self-referencing here, no context or relevance; and there's no communicated/understood "okayness" in using the word.