Paki actually means 'pure' and 'clean' in Urdu the country's main spoken language. Pakistan translates to the word 'Pureland'. Obviously racists don't realise this and somewhere down the line they have assumed it is them who have created the word/term during the so called 'paki bashing' period in the 80's when 1st generation south asians in the UK were targeted for racial abuse.
Native Pakistani people actually don't take offense to the word as explained above and also to the fact that similary it's like calling someone a Brit, Scot, Aussie, Yank, etc.., although some don't think it's a PC concept to do so.
You see the word is not the problem, it's the use of it, from whom and in which context.
What I will add is that I have noticed UK Asians of Pakistani origin calling each other 'paki' in a respectable 'brotherhood' manner. Like rappers use 'nigger' to each other (although that word runs deep into things best forgotten).
Racists both White and Black have had a backfire when trying to be racist to 2nd/3rd generation pakistani/bangladeshi/kashmiri origin asians, they've felt the wrath to the extent police on a national riot scale have to intervene to help them! I'm talking Oldham, Bradford, Lozzells (Birmingham) and others unmentioned where the perpetraters have had the media limelight to show paki/bangla/kash asians in bad light.
Calling someone a 'paki' on the street now is a laughable offence where I think the sting of the word has weened out. Other than that if you want to attract attention as a racist towards pak/bang/kash asians just go up to them and tell them your view and I'm sure they can find a bed for you in the nearest hospital.
paki = people assume kill intelligence