Having read this thread it seems a lot of people from other ethnic backgrounds seem to have been called a 'Pa*i'.
For those of you saying its PC gone mad, an overreaction etc i think this is where the problem lies.
I am Pakistani, at school me and my friends used racial 'slurs' against each other (including names for white people, irish people etc) but it was all humour, none of us got offended and we only said it to each other because we knew deep down none of us was even remotely racist.
If someone calls me a 'Pak*', unless they were being genuinely racist and intimidating to me, I would take it in jest. I am never called a 'Pa*i' for some reason, mainly to do with the fact that general English people have no clue who is Pakistani and who isn't.
It seems a lot of people of Indian or African descent get singles out for being 'Pak*'. So, not only are they being called what is generally percieved as a racial slur but they are also extra pissed off because they are not Pakistani in the first place. I know Indians in particular hate to be associated with Pakistanis, so you can imagine their irritation at being called one.
However, most Pakistanis have no problems with the word. Many of us use it in general conversation, maybe next time theres a cricket match on you should look to the Pakistani crowd and see the slogans such as 'Pak* Power'. 'Come on Pak*'s!' etc.
The problem with the P word lies with OTHER ethnic minorities who it seems are more upset with the fact they have been mistaken for a Pakistani, rather than being the actual victims of racism.