I, too, was enjoying the beginnings of this thread, at least some of them, but became uncomfortable when the stereotypes were drug out. It's the same as my son-in-law and his friends calling each other n*****, without taking offense, where it would be totally inappropriate for me or anyone not of their colour to do the same.
Jody, I am sorry, but I think your response was probably a little over the top. Surely there was a less offensive phrase you could have used to let on you knew what he'd called you?
This has nothing to do with the dreaded PC, it's just good manners.