We often fall victim to using particular terms without fully comprehending what they imply, and that's what I think has happened here.
Is it possible that they were perhaps suggesting that on occasions, persons who are usually judged to be of 'normal' mental capacities; make questionable decisions and assertions that might, in isolation, cause them to be accessed far below their 'normal' faculties, such that they would, in isolation, rate them statistically as 'below normal'?Possible yes, but to me it seems much less likely than a simpler possibility i.e. that "retardo" is being unwittingly used as a stand in for "stupid" or "ignorant".
We also tend to not notice how poor a "joke" is until the joke is on us. Empathy matters to me much more than political correctness. I'm not telling people what to do or not do, but a thought experiment may illustrate this better than arguments can - Imagine for a minute or two that you had a close friend or relative who is mentally disabled (I have two such relatives), then see if you still think "retardo" is a suitable rebuke term.