How is "Paki" an insult? Here it's just a shorter way to say Pakistani.
Became unacceptable in Britain because of the way certain people have used it over the years.
'Retard', on that list, too, is, I believe, still a proper medical term. It's just that certain people have adopted it and used it as an insult.
It's also not all that long ago that 'handicapped' was the politically correct term for a disabled person.