At the risk of repeating earlier messages and praying in aid a bit of leeway because I am not from South Asia, I think it goes in general terms like this: historically in the Indian sub-continent the caste system divided people into higher and lower castes. The lighter skinned groups of people tended to be members of the higher castes: those with greater financial means and social standing (e.g. Brahamins). The darker skinned people belonged to the lower castes. The "untouchables" (those whose job it was to clean up sh*t) at the very bottom, with the darkest skin.
Mixing of lower and higher castes was not encouraged and as I understand it, even today, attempts to promote rights for lower caste people have met with some hostility in Indian society.
The term "half-caste" IN ITSELF suggests that the person referred to is somehow unwhole, a half-breed (the pure waters have been muddied, if you like), even if the person using the term does not mean to suggest any such thing. THAT is why so many of use are offended by it. I can appreciate why many people who do not connect the term to this meaning have no problem with it, but as far as I'm concerned and where I come from it is unacceptable. I would certainly challenge anyone who used it to refer to me.
My mother is black South African and for many years she had to live under the Apartheid system, a gross example of how a state-enshrined caste system can ruin lives.
I'm not saying it's anything like that here (in fact in relative terms I think we are very lucky in the UK), nor that language can change the fact that racism exists, but I don't think it helps to simply leave the term to live on, otherwise we would still be referring to black people as "negroes", another example of a term which is not as aggressively insulting as "Ni**er", but offensive because it suggests that black people are another species, when we are all one species.
My dh is also of mixed race/dual heritage. When our baby is born it will be of black African, black Jamaican white English origin. And we'll both be damned if anyone calls him ot her half caste. Hopefully, by the time our child is old enough to have to deal with all that stuff, the term will have all but died out, and not before time!
Hope this doesn't sound too pompous but it's a subject I feel really strongly about and I'm glad I'm not alone.
i would go so far as to say if this term is used in certain areas