Of course this brings up the very interesting question of how words like "retarded" came to be pariahs in the first place. Laura is absolutely right when she says that "retarded" does not mean "stupid." And if you don't believe that, just check the dictionary. When the French computer voice says to "retard the engines," he doesn't mean to make the engines stupid, he means that the pilots should throttle down to slow the engines, as Mike points out.
The core meaning of "retard" is "slow." As such, it was used for ages to describe without deprecation what we now use a million euphemisms to describe: some sort of dysfunction having to do with the mind. It was, from a linguistic point of view, a perfectly appropriate descriptor, although not particularly specific.
But there sure isn't anything specific about "challenged," a word that drives me nuts, because not only is it sugar-coated, it's not as on-point as "retarded" was. There are all sorts of challenges, many of them having nothing to do with the concept of "not up-to-speed."
Euphemisms have always been one of my pet linguistic peeves. I hate them, because they tend to water down both language and thought. I understand that they can be comforting (it's a lot less painful to say "I put my cat to sleep" than "I killed my cat"), but in the long run I've always thought it best to say what you mean.
I'm sure many a doctoral thesis has been written about this. And don't flame me. . .I don't use "retarded" to describe the mentally ill. I accede to the sensibilities of the commonweal, and I'm not interested in gratuitous insults.
But between our educational deficiencies as a nation and the imprecision caused by political correctness, our language is certainly becoming weaker.