That confirms what I remember from that time - kids were convinced you could teach it to say things, but I never saw any of them succeed. I think a big toy company would be somewhat averse to having their flagship product spew racial slurs.
Slippery marketing plays a big part in this, so I can't blame kids for thinking that. I remember the commercials for these toys and there was an implication that dialogue was possible (specifically remember a commercial where kids are introducing themselves to a Furby and the Furby responds in kind).
To look at another example of how dishonest marketing tends to be aimed at kids, Kevin McCallister had a Talkboy in Home Alone 2 that, for purposes of the film, had absolutely insane fidelity when it came to recording a playback. As someone who actually owns one (I collect and repair old electronic toys and computers as a hobby), I can tell you that the film and marketing definitely oversold the devices capabilities. The playback in particular is really quite awful, and this assessment comes from a fully restored device.
Another interesting point in your comment reminds me of a parrot my grandma had when I was young. Not a visit to Grandma's would go by without little me trying to secretly teach it cuss words while nobody else was in the room. What a time!
