Except for the fact that usage determines meaning not the other way around. There's lots of archaic terms that we just don't use anymore because of a negative connotation that was ascribed to them. The fact is that the word retarded simply doesn't mean what it used to anymore because of the fact that it is almost universally associated as a synonym for stupid, not as a clinical definition. "Idiot" and 'moron' also used to be clinical definitions that the DSM has backed away from due to their negative connotation, much as they are now doing for 'retarded'.
tl;dr summary: Usage defines meaning, your argument is technically correct but invalid.
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