@Min - actually the C-word, although common in jokes or memes, is still highly offensive here in the UK.
If someone called someone the C-word in the street, expect a fist fight.
@The Fall Guy - the N-word used to be an ethnic slur. But it's meaning has changed over the decades. According to my grandmother, the N-word used to mean a shade of brown, before it was used as a slur (not sure about that, it's worth checking out).
A large part of this change of meaning is down to black Americans*. They use it in a different context and spell it slightly differently - 'nigga'. It can mean 'idiot' (check out Chris Rock's stand-up routine: there's black people and then there's niggas); it can also mean dude or mate (e.g. what's up my nigga?). I remember the first time I listened to Fiddy Cent's In Da Club - explicit version. He says the N-word more times than an Alabama klansman.
African-Americans also have a certain flow and flair in their way of speaking. In short, African-Americans have made the N-word 'cool'. There is also some comedic potential there, too.
I guess some racist whites still use the word as an ethnic slur, but just as many use the word in the same ways as African-Americans do.
BTW - I don't think words should be outright banned by British or American law. Let the racists say 'nigger'. Surprised? Well, what were they gonna do, sing us a chorus of Ebony and Ivory? XD