It was not a racial slur by any stretch of the imagination. Have you ever heard "macaca" used before?
What hurt Allen, besides the Washington Post, was that he looked mean-spirited in calling the Webb volunteer a macaca. He was saying " this guy's not one of us". That went against the perception that Allen was a nice, optimistic person.
I am sorry he lost, but I share the sentiment that he would have been a disaster for President in 2008 (and I fully supported him).
You seem to be incorrect on that: http://en.wikipedia.org/wiki/Macaca_%28slur%29
I agree with you about 2008, but it sure would have been nice to hold the Senate.