There is a genuine medical application for the term. I once worked for a company that was setting up a cardiovascular screening service, and when personal details were filled in everyone was classified into 5 racial groups. I forget the exact names, but Caucasian, Oriental and Hispanic were three of them.
It was quite important to know this, because certain physical characteristics (like blood pressure and pulse rate) had slightly different normal ranges for each group. There was a fair amount of overlap, but if one of those measurements was borderline it was the normal range for that racial group which decided whether the person was considered healthy or not (with all kinds of possible consequences relating to life insurance, or needing further tests etc)
I'm not in favour of banning the term "Caucasian" just because the BNP use it. It won't contribute a jot to banning the BNP. It's the people and the attitudes that need changing, not the terminology!