SOYLENT GREEN IS PEOPLE! 
)
My opinion is that people should be allowed to say whatever they like, so long as it does not cause someone else physical harm. Emotional harm? Eh, not so sure -- that would allow the most sensitive among us to become the language police, and I don't want to live in that world.
I think it's enough that if someone uses a derogatory, insulting word, the larger (more polite) society exacts a cost on that person's social standing. Said another way: if you say something that makes you sound ridiculous, homophobic, stupid, etc. -- your social standing drops accordingly.
This only holds for communities that are not already stupid and homophobic.
An interesting discussion from my younger years. Someone was complaining that the various Gay Parade's in NYC were getting out of hand. They said (perhaps correctly) that they would 'never' take their child to that particular parade, so as to avoid answering questions like, "Mom, why does that man's pants have no bottom?" and so on. This sounded rather reasonable to me at the time. This person's point was that there are a lot of gay people who don't wear their sexuality on their sleeve. You wouldn't know they were gay unless they told you. I work with a designer in my business who could walk into my factory either in a perfectly tailored business suit that should put him on a magazine cover... or hot pink boy shorts that are nearly
inside him.
Krog: "Hey, how are y--
Aww, man!! C'mon!" (averts eyes)
Designer: (laughs)
So it made sense to me that being so
overtly gay during the Gay Parade was a good enough reason to be 'against it' in some way, or to put the people who walk in dressed that way into some other category, away from 'normal' gay people. But then it occurred to me --
Carnivale and
Mardi Gras are very, very overtly heterosexual parades/celebrations, aren't they? Women wear pasties and crystals and feathers and not much else. So really, is it so wrong for gay men and women to parade about in bondage gear? It seems to me that no one should be forced to hide who they are. America is about exulting in who you are, without fear.
I'm still against people in parades having sex in public (hetero- or homosexual sex, makes no difference), which is (rightly) illegal.
I do however, get very irked when some gay rights organizations try to make it illegal to openly disagree with them. (ala the Chik-Fil-A incident from last year). Disagreement is not the same as acting against someone else, or infringing upon their rights.
So, say what you like and pay (or reap) the consequences.
