catinthehat - since you ask so politely, I'll explain the difference....
What I object to is, as I said in the OP, the label - the "noun" to describe someone, if you like
Saying someone's behaviour is mad, saying someone had an accident and they are now crippled, saying that someone is doing weird things, is just an adjective, IMO
Saying someone IS a weirdo, loony, nutjob, psycho is just as horrible as saying someone is a spac, retard, cripple - and, Iluketosleep' an "n" or a "p". It should be viewed in the same way, if they are exhibiting mentally ill behaviour 
Can you not see the difference, or the point i'm making?
And iliketosleep, people may still use those words (no-one I know thankfully), but it doesn't make it right or acceptable. Does it?
It seems that to some people, the mentally ill are still fair game for ridicule, because their behaviour can be very strange