If you read back through the thread you'll read my arguments about the word "****" itself. It's been corrupted by the context of its use. It's like "******" and how "black" people try to use it as an endearing term as if "they're" taking the word back to mean something positive, but for a lot of people it'll never be something positive.
**** is largely used as a derogatory term to refer to people who "look like Pakis" because, you know they "all look the same, so what's wrong with it?". Whether or not your Pakistani mates use it as joke is irrelevant to the way neil was using it. It's like people claiming "going for a chinky" isn't in any way offensive because "chink" is some how not a racial slur anymore (becuase they themselves have decreed it, of course).
From a completely innocent perspective, "****" is no different to "Brit", no, but people have changed the meaning of it.
As for Neil's use of it, come on use some thought. If he was genuinely trying to come across as not racist and "a changed man" you'd think he'd put a bit more effort in and not say "****" because it's basically undermined any point he could have had.