I think that starting another thread is exactly the thing to do. The use of words/terms that cause offence, why they might be inappropriate/hurtful isn't something that can be condensed into a simple "don't do it" (though that has its place) but needs space to be discussed.
Just my opinion.
Personally, I'm old enough to have noticed a big change. Words like "retard" are pretty unacceptable now, and "loony" makes people stop and think twice.
I've noticed that people usually use these terms out of habit, and stop when it's explained why it's not OK. And, even more, when LIFE brings them into contact with people affected by the issues behind the epithets. My famous example of that would be India Knight, who has stopped using terms like "spaz" and "retard" since having a daughter with SN. That makes me think a lot of it is unfamiliarity, rather than malice.
At the risk of being patronising and a killjoy, I'll just add my voice to those pointing out that there are terrible problems with the provision of mental health services. This is (part of) what leads to people with mental health issues in public places, acting oddly. It probably means that they have little/no support, are off their meds., and are in insecure accommodation.
That sounds horribly killjoy, but it's something to think about, and something that should be told, repeatedly.
The fact that there is little support outside the family for people with SN, including mental health issues, is something that adds to the worry of parents of SN children. That, sadly, is what you can see when you look at the "resident town loony": how the "state", "we", "the community" care for those who have mental health issues.
I'm sorry if I'm sounding like a pc bore - but it needs to be said as part of the conversation.