Recently, we had a main-site post, Who was the first "trap" character.
This post generated a lot of controversy for the use of the term "trap" to describe cross-dressing characters, amassing 3 upvotes, 3 downvotes, at least one offensive flag, and one favorite in under an hour. In general, "trap" refers to a male character (in the biological sense; the character's gender identity and sexual orientation are not usually implied by the term) who is mistaken (deliberately or accidentally) for a female (for instance, based on their choice of clothing). The term "reverse trap" is often applied to the reverse situation of a female dressing like a male, though sometimes "trap" is used for both cases.
This term was seen as offensive to some as a transgender slur (see, for instance, this tumblr post). However, the term is fairly standardized in the anime community (for instance, see this Know Your Meme article), and is not usually intended as a slur in this context. A Google search for "Anime traps" gives millions of results, coming from many anime blogs, fora, and other sites, and none of these seem to be deliberately using the term in an offensive way.
What should we do in this case? Should we treat the term as offensive and use a different term for the same concept? Or should we allow use of the term despite it's potential to offend some people? Also, how should we deal with similar cases in the future?