jungletoad: The use of the word "retard" as a slur is probably its most pervasive use now. Language changes over time, and if you want to use the word "retard" or "retarded" now, you have to be more specific to avoid the automatic assumption that you are using a slur. For example, I can say "the patient's retarded growth will keep him from ever growing to a height of more than 5 feet tall" and most people will know I'm using the old definition, but I can't say "his height is totally retarded" without leading to confusion and possible offense.
I think the correct term for such a person would actually be "retarded". Having taken a psychology class once, I know for sure that people who have low IQ are classified as "retarded." That is the official, medically accepted term, and that is probably true for all developmental disabilites.
That is why using the term "retard" as an insult is considered derogatory, because you're taking a term that is used by doctors to describe certain disabilities and twisting and using it in a negative way. If everyone I don't like, or does something I don't like, I call a "retard" or "retarded", it is putting down people who have developmental disabilities.
It is analogous to constantly calling people a "cancer patient" as an generic insult. Even as a bystander, shouldn't I take an issue with that, if I lost a family member or close friend to cancer, or I myself was dying from cancer?
(I'm not really addressing you specifically, just making general comment and expanding on the points you make)