I find that such terms add a fillip of excitement to a conversation.
I’ve heard it used in the derogatory context many many times since I moved to this area in 1985. A very large Filipino community exists here (not surprising, considering the large Navy prescence.) And although I’ve never taken a poll (“Excuse me, but by what racial slurs may I use to address you?”) it’s understood by polite people that “flip” is not something you call someone without expecting trouble of some level.
As for the co-worker in the OP, well, seems to me that she’s just one of those reactionary PCers that would rather not use her brain if she can help it.
Sean, I don’t doubt that the word is still used in a derogatory manner, especially in areas that have a long-standing Filipino presense. I’m willing to bet that the Filipino community in your area dates back to the 1940s, if not earlier. To my younger ears, the term is rather quaint and old-fashioned, much the same way that old-timers still call the Motherland “P.I.”. (Back in the Philippines, these initials are now used as an abbreviation for a horribly obsene phrase.) Still, whitey better not be calling me no flip! 
Jeez, pretty soon every ethnicity will have a racial slur of their own. FYI, I’ve never been offended by “flip,” but only because that would be retarded.
I observed the following graffito at a library here in California:
“Filipinos representin the 510”
and under it was written
“Flips Suck”
So I think it’s derogatory, but obviously only when referring to a Filipino. People who don’t understand that the same concatenation of letters can mean two different things shouldn’t be allowed to roam the streets.
Among Filipinos, “Flip” is sometimes used. I haven’t heard it used often except by younger Filipino-Americans. I sometimes refer to myself cutely as a “Half flip” - meaning i’m half Filipino.
The more common slang term for a Filipino, used by Filipinos is “Pinoy” for men, and “Pinay” for women. There’s even a term for Chinese Filipinos (the Philippines has had a LONG history of trade with China and has a good sized Chinese community. Most are in the shipping and merchant type businesses, my father’s cousin’s husband is in that business. Anyway, the term for Chinese Filipinos is “Tsinoy” (“ts” is used for “ch” /tS/ in Filipino).
As with Terminus Est, i’m more offended (and really annoyed) when people spell Filipino as “Philipino” “Philippino”, and Philippines as “Philipines” or “Filipines”, etc.
Here’s a handy guide:
As the name comes from the name of the Spanish King at the time, Rey Felipe II:
- Las Filipinas is the name of the nation under Spain in Spanish.
- Filipino is a term from Spanish denoting someone from Las Filipinas (and originally referred ONLY to children of Spaniards who were born there, not the natives, who were called “indios” (Indians).*
- Philippines is derived from the English version of Felipe - Philip, and applied to the name of the country.
- Pilipino is the native term for a Filipino. *
Note that in most of the native languages, there was no f sound**, so f often becomes P. You’ll see written “Pilipinas” which is the way “Filipinas” is said by your average Filipino, and is the native name for the country (Actually the official long name is “Republika ng Pilipinas” - Republic of (the) Philippines)
*While Tagalog and other Philippine languages have no gender distinctions, Spanish influence comes into play here. For a guy the word Filipino, or Pilipino is appropriate. Howver, Filipina is the usual term for a woman. I’ve not heard often “Pilipina” used for women.
** However, the F sound is sometimes said, and has worked its way into the speech of some people (for those who doubt me, i’ve heard it from relatives who live there.) It’s rare and most Filipinos use solely P, even when pronouncing English: Pry the pish - Fry the Fish.
I’m half Filipino, and I wouldn’t flip out…
My Filipino relatives and friends use the term all the time, when referring to people of Filipino descent. In fact, one of my “cousins” (for some reason, if you’re Filipino, all the people you know, whether or not they’re related to you, are cousins, aunts, or uncles, but that’s a different story…) comes from a nearby community with a fairly large ratio of Filipinos (yes, it’s a naval base)- she refers to it as “Flipsville”.
Of course, I would have a problem if someone were to say something like “Get your stinking paws off me, you damned dirty Flip”, but I think that’s more an issue with the modifier and intent.
I refer to Filipinos as Filipino or as Pinoy.
Oddly, one should never murmur in Spanish around Filipinos. Apparently the word “muchachos” means something entirely different in Tagalog!
(Now I murmur to myself in Pig Latin. Much more intellectual.)
I’ve never heard “flip” but I have heard “flipper” but as a joking insult.
I am Filipino and I don’t find it insulting.
It’s not the “flip” that’s offensive, it’s “chart”. That’s clearly a dig at people from the Charter Islands.
Still, I would try to use a different term for, say, rubber sandals if there were any Filipinos present, just to avoid any akwardness. I mean, they were nice enough to take that “KKK” off their flag.
Bah.
KKK was perfectly good abbreviation for our revolutionary organization until some white-boys with low skills in spelling decided to name their bigoted club.
Gee, I hope she doesn’t write on her flip chart using colored pencils.
While listening to doo-wop music. 
It’s not that they were “nice enough” to take KKK off of their flag, it’s that General Aguinaldo designed the current NATIONAL flag as we see it today, and that’s the one adopted. the KKK flag was the banner of the revolutionary group “Kataastaasan Kagalang-galang na Katipunan nang manga Anak ng Bayan”
K - Kataastaasan
K - Kagalang-galang
K - Katipunan
The name means “Highest and Most Venerated Association of the Children of the Land” loosely.
Oh and you can call those rubber sandals “chinelas”, because that’s what Filipinos call them.