Well, that’s one etymology for “cracker.” Other suggestions include “Soda Cracker,” and “Craic.” The former is a type of biscuit and the latter is the Irish word for boasting.

If we’re being serious, almost all slurs are basically just normal insults like a kid might hurl on a playground that we’ve “decided” are worse. For example, most of the slurs I know about Asians are just mockery of facial features, accent, place names… imagine me going up to some Pacific Northwest liberal and getting in his face and going “this guy’s from Washington! Hey Wash! What are you doing here, you gonna cry about the gays now Wash?” It sounds retarded, right? But that’s exactly what “Jap” or “Nip” is.

The degree to which we’re bothered by a slur has very little to do with the literal meaning behind it and much more to do with how we perceive the degree of animus with which it is being used and the speaker’s power to act on that animus. The reason “kike” and “nigger” are “so much worse” is because Jews and blacks perceive and react to perceived racial animus more strongly than whites, and because they have ethnic lobbies to enforce their perceptions of the terms across society in a way whites don’t.