Some people take the point of view that some words are always improper to use because of the social meaning. According to this thinking there isn't any context or history that can make it's use proper. In this world, it is debatable even to repeat the offensive statement to disparage it.
So we get, "He then called him the N.... word".
I disagree with this. I am a true liberal on this point.
If someone is joking, and especially if it is funny, it's ok with me.
If someone is making a serious point and the easiest or more natural way to communicate it is to use inflammatory language, it's ok with me. Perhaps, they could add, "no offense" or "air quotes", but I'm still onboard.
Lastly, just in common everyday language under any situation, I would put any statement in context and determine the significance.
So for instance if a person honestly treats all people equal in every way that we can measure but says something that could be construed as insensitive to whomever, I would give them a pass rather than a person who is an elitist of some type who disparages a group that he generally is at odds with.
So for the Harry Reid controversy, he gets a pass.
For the Bill Clinton controversy from the book "Game Change" where he is said to have told Ted Kennedy "a few years ago (Obama) would have been getting us coffee" would also get a pass based on his public history EXCEPT he has now made a few statements that could be offensive. I defended him last time, but now I'm wondering if he's scarred from his past.
But as of today, I'll give him a pass.