Well, taking a word to diminish its power would work if everyone used the word. To say only those that are the target of the word can use it doesn't empower anyone or diminish anything - the exact opposite.
The N-word, at it's very least, is in poor taste and rude, regardless of its usage. That being said, we're an internet forum of gamers so that has to be taken into account.
Tanoomba's entire premise is what I have problem with, which is why I make fun of it. He has said himself that he doesn't judge people by the way they look, only their character after interaction. I'd love to know what Utopia he lives in so I can move there and shrug off human nature. I've been randomly attacked by drunks and homeless people just walking down the street. I don't hate all homeless people, but I do cross the street now or give them a wider berth. At the very least I keep an eye on them as I pass. Same thing goes with "ghetto trash" or whatever word you want to use. It's human nature. I stay away from snarling dogs and snakes, too. I don't hate animals. How many times would Tanoomba need to get mugged in the street before he starts categorizing people based on their looks, attire, posture, location, etc., and decide it may be safer for him to not smile at those that meet the description based on past experiences and walk right up to them and instead maybe move away? Chances are also that he will find a word to use to describe those types of people. If there's one already in common usage, chances are he'll go with that one.
For Tanoomba not to understand the context of word usage, or the people that it's actually referencing, is understandable given that he's never had any interactions that would influence his view. But he can't white-knight anti-racism if he has no understanding of that part of human nature, and understand that even those that use "chimp-out" (that one's pretty bad) aren't necessarily perpetuating hate based on race alone.