I view it the same way as I view "faggot". When its used against gays, its terrible. But as a generic insult, its OK (though it makes them sound like a /b/tard).
Faggot has the historical connotation too. It refers to the "bundle of sticks used for firewood" definition. People who use it as a slur are basically saying gays are the faggots(the stick definition) of Hell.
This doesn't mean that someone saying "DO IT FAGGOT" is a total homophobic prick though.