Unless you were raised by well educated people, or carpetbaggers, or the rare Southern hippie, racism was something of a default mode in the South, so casual and ingrained that most of us didn't even realize that what we were saying was racist. I don't know what kids North of the Mason Dixon line called each other on the playground in the 80s and 90s, but in the small-town South, kids called each other "ni**er" and "fa**ot" as easy and as casually as kids might call each other "jerks" or "dum-dum heads." You didn't have cooties where I grew up, you had "ni**er" cooties," and the only names we took any real offense to were variations of "ni**er lover," the lowest of all insults, reserved for kids who insisted they were safe when clearly the ball reached first base before they did.
The notion that my kids could say those words -- words my six year old has never even heard, and hopefully will not hear until he's studying the the Civil War and the Civil Rights era in high school -- seems appalling and repulsive to me, but that was not so in the schools I attended in the South. I don't remember ever hearing a teacher ask a student not to use those words, and there's no way they could've not heard them. But then, what were teachers going to do? Raise the issue with the parents, who taught the kids those words, who woud dismiss it? We knew the "N-word" in the South; it was the "R-word" that we'd never heard before: Racism.
Read more at Paula Deen and Why So Many Southern Racists Don't Believe They're Actually Racists