Unfortunately, we're still in the day and age when calling someone "retarded" can be said without any thought to disabled Americans. While it's not very couth, it's certainly in the crowd of words that can be said without direct insult to what they reference. And I'm not particularly encouraged by Palin using this off-color colloquialism as an opportunity condemn Obama's chief of staff. Emmanuel is widely known to be one of the most religious members of Obama's crowd, regularly attending synagogue, and asking his Rabbi for advice on political-religious matters. I highly doubt he'd have any scorn for the "differently-abled" among God's children, as Palin suggests. He was probably just ticked off.
Besides, wouldn't she agree that the jist of Rahm's remarks were right on target?