retard has been on the last of no no words for a while now. Lots of co-workers really dont like it. cant tell if i'm on the wrongside of history but i really need a word for when my friends do something stupid.
"Retard" as a derogatory term and/or as a slur is indeed offensive, and people are using it less and less. It's best to avoid it. If you're still using it, you are on the wrong side of history. Find another word instead.
But "mental retardation" is a clinical term that is perfectly acceptable, and to bleep it for fear of saying it or spelling it out, is quite ridiculous. This is the first time I've ever seen it done, in fact. It's as silly as bleeping out "Niger river" because it is similar to a slur and shares some amount of etymology.
In fact the reason why "retard" is offensive, is because it is taking a term for a mental condition ("retardation") and turning it into a slur. It's similar to how calling something "gay" in a derogatory manner is offensive.
With "retard", the derogatory use became so much more prevalent than the clinical that even the latter was overshadowed and began to take on a negative connotation (at least, for many people).
You most likely prefer "retarded" because it's feels different, and this is closely tied to it being a "no-no word". Swear words trigger a different part of the brain (limbic system and basal ganglia), so they feel more emotive, but if we didn't train ourselves to store them that way, they wouldn't.
Your cognition is spot on and you should be proud that you've been able to reflect on your usage of the word.
When I decided to stop using "retarded", I chose to replace it with "ridiculous". It was very easy to train my tongue. Since then, my vocabulary has gotten much sharper.