You made really good points but I think the problem is that the word "retard" has been used as an insult to put down people with mental disabilities so often and for so long that it sort of became a kind of "n-word" for mentally disabled people. Also, as with all diseases and disorders, the name changed over time. It isn't "Mental Retardation" anymore, it's Intellectual Disability. I know it's more wordy and isn't as cathartic to say as retard but it shouldn't be used as an insult period.
We're going to have to accept the fact that the world is becoming more and more politically correct whether we want it to or not. It's better to adjust than to become set in our ways and grow to become slur-slinging old coot who nobody wants to be around.