But regardless of your opinion, using it as an insult is uncalled for. Since essentially you're lumping people who already have problems in with whatever it is you're trying to insult.
I think by now we're really arguing semantics, but I would argue that I do not lump anyone in with the people I call retards.
I would never call a mentally handicapped person a "retard". To me, that would be an incredibly insulting and inappropriate thing to do. The only people I'd call retards are people who are not mentally handicapped.
Similarly, if I call someone a dick head, I do not consider that to be insulting, or even related, to physical dick heads... it's just an insulting term. If I call someone (a guy, usually) a bitch (e.g "Yo, bitch, pass me the beer"), that does not imply any connection with female dogs.
Btw, I don't see how you can argue that being mentally handicapped (which by definition means having mental issues) can be neutral. It's clearly a net negative. It doesn't mean the person is more or less good, much like missing a leg or an arm (aka physically handicapped) doesn't make the person more or less good, but it's definitely a "bad" thing.
But regardless of your opinion, using it as an insult is uncalled for. Since essentially you're lumping people who already have problems in with whatever it is you're trying to insult.