Matters of courtesy and respect require common sense, but using examples where common sense makes the rule obviously inapplicable is "slippery slope" fallacy, and, to my mind just someone looking for excuses to engage in racist or sexist, or whatever, behavior.

So, for example, if someone were to whisper to you at a party about someone nearby, "You know, she's a dyke," (a mildly derogatory reference to a masculine lesbian), almost always one would let it pass except maybe change the subject or maybe excuse oneself and find other company.

I would say that being offended by such things, just as being offended when someone is disrespectful, does no good and the only harm is to oneself.  It's like when someone uses a harsh obscenity or commits a grammatical error or other faux pas -- our getting upset only raises our blood pressure, not theirs.

Still, it also seems to me that one cannot let especially bad bits of racism and other such things go unremarked.  This is tough.  It may be a cultural blindness (as what happened to me once when I used the word "spastic" in central England -- it seems this word is taboo in Britain but of course frequently heard in the States without offense.  The thing is, care is needed when protesting to such things, as one is more likely to reinforce the prejudice than anything else.

It may also be deliberate crudity for humor or a thrill or just a bad habit. I tend to avoid associating with such people, especially if they rationalize or complain about political correctness.  They aren't worth my time and I figure they say similar things about me when I'm not there.