It's OK for blacks to use the N word because it's all in the family. It's not OK for whites because they're strangers. I don't know what the rule would be for mulattos.
My thirteen-year-old daughter who saw the incident said that she would be expelled from school if she used it. However, she also told about how the blacks at her school use the N word at each other all the time. The kids understand it as pushing the limits and accept it. It's the adults who play the PC games who fail to see their own inconsistencies.