People who use it at every turn are stupid. Such a beautiful word should be used sparingly to preserve its effect. I see it in the same category as cunt. You better be really prepared to insult somebody if you use it, even if it isn't directed at them.
Why some insults are considered the worst of the worst and some aren't, I don't know. It's not a word that truly offends a person, it's what they mean. What makes cunt worse than pussy, pussy worse than gullyhole? What makes faggot (when used in this context) worse than fudgepacker, fudgepacker worse than Nancy? They're describing the same things, effectively; the level of offense should be the same.
I wish I could get an honest poll of how many people actually think of homosexuals when using the word faggot. I guarantee you almost nobody does. For most people it is completely detached. Yes, I know that some backwards people use the word in genuine hate, but this faction hijacked a choice word from us without permission. We need to reclaim it. For most people, being a faggot has nothing to do with orientation. According to wikipedia, the word faggot has been used in the English language since the late 16th century, and it has undergone numerous transformations in accepted meaning.
http://en.wikipedia.org/wiki/Faggot_(slang)
It's sort of like the word queer. At this point, queer is such an old and antiquated term that I hear the word used more in its original context than I do as a slur. The reason faggot doesn't gain this re-acceptance is because its original context is offensive too, just in a different right.