I think the word is typically pronounced slightly differently (more correctly?) when used that way. This clip from The Hangover uses the slight differences in pronounciation for comedic effect: http://www.youtube.com/watch?v=PoendYt_ZJ0 (skip to 0:45, video contains mildly offensive humor).

Obviously the obsolete medical usage, now offensive usage, is just the regular word meaning delayed, but I think that somehow that specialized usage strayed from the generic usage over time.

Nope, never pronounced it different but clearly context is important :)

Which is why my comments said "Retard in its noun form" obviously retard has a verb form that means to slow. I used it in engineering a lot.

Well, no, a mentally "retarded" person is not expected to develop further. They're behind, but nobody thinks they'll catch up. "Stunted" would be a more accurate term than "retarded"; the latter is just a euphemism.

This is the way I use the word too.