"There are a number of possible explanations for the diplomatic offence that George Bush has given to Pakistan by the unfortunate use of the term "Paki". It is possible that the president cannot manage more than two syllables without careful coaching. It is possible that he was unaware that the word was offensive. It is possible that he was aware that the word was offensive. None of the above is reassuring."
I don't know how many people heard about this incident (did it actually make the TV news?), but the latest Guardian piece about it (quoted above) is here...