I've been thinking about this thread a lot, and I think the word crazy is off-limits. It is certainly not polite to write off people with mental illnesses as "crazy." If somebody is being treated for Bipolar Disorder, or PTSD, or schizophrenia, or whatever else, it wouldn't be socially acceptable to say "Oh, ignore her, she's just crazy." When people told a certain poster on the SDMB to "adjust his meds" even though his history with mental illness was well known, it caused a huge kerfluffle. So I think the way we view and use the word has shifted slightly, to the point that we can use it in casual conversation, but not when referring to mental illness, you know?
I'm still swimming in harmony. I'm still dreaming of flight. I'm still lost in the waves night after night...
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I just want to state, for the record, I am pro-cunt.
I once had the "female specific insult" conversation with a girl I worked with several years ago. She was adamant that it was worse to be called a bitch than a cunt because female dogs (bitches) are known for having a lot of sex.
Back to crazy versus retarded, though. In my experience, "retarded" seems to only be used to describe human behavior, while "crazy" can be used to describe other things. You might say "This rain is crazy," but it's less likely you'd say "It's so retarded that it rained on the day we were going to the beach," or something of the like.