I am going to avoid the cancerous posts above and instead simply jump to the point, because reading you two argue is like reading two kids arguing over who gets the gamecube controller. Both of you, stay classy.
Anyways.
I don't really agree with it, I have used it but I have an awful mouth. Sometimes context does change it's offensiveness (for example, I have gay friends and I tease them with it, they tease me back), but more often than not it's a pretty stupid derogatory comment that I try to avoid since it is uncreative, based on a slur and is honestly pretty offensive.
What about retarded? My school has this big campaign every year to stop everyone from saying it (it doesn't entirely work, sadly), but whenever someone uses it it ticks me off.
Honestly, retarded I don't believe is a slur. I know, pretty controversial of me to say it, but the reality is, do most people use "retarded" to refer to someone who has a disability? Or do people use it for people who are just plain stupid? I would argue the latter. Retarded is mocking someone's intelligence, which is something that you can do to anyone, not just someone with a disability. What makes it different from just "gay" is that gay almost ubiquitously refers to homosexuals.
Claiming that retarded is a slur also implies that people who have mental impairments by default are "retarded" which is honestly more offensive than, say, someone calling a website or a pokemon design retarded.
The word retarded works almost completely opposite to "gay" does - gay is considered a slur if it's used outside of strictly talking about homosexuals, but retarded is considered a slur only in reference to talking to people with mental handicaps.