People tend to believe lies/urban legends if they're interesting enough or if enough intelligent seeming people believe the lies.

There's a sea shanty I sing which contains a word. Several people, some I quite respect, have told me the word is a racist perjorative, and have an explanation of why. The explanation sound somewhat plausible... if you don't mind a lot of dancing to get from point A to point B.

Now, having a dictionary from the 1960s which gives a different meaning to and origin for the word and doesn't mention the offense-inspiring one, AND growing up hearing the term used without any racial connotation, I think the 'history' is invented but is retained because it just makes a better story.

I'm all for not hurting people. I don't care much for those who are into a 'cult of offendedness'. I think people should look for facts and make their own decisions about whether it's logical to think a thing is offensive.