It’s come into use in just that way in the neopagan festival circuit. I started using it as a joke the year of Book One, and it’s everywhere now (not that I started the use, of course; just coincidence, I’m sure.) But yes, with a little bit of self conscious guilt, more often than not, as it sounds like a racist/derogatory/prejudiced term, even when one is making a lighthearted reference to People In Town Who Think We’re Weirdos For Doing Magick and Running Around In Wizard Hats and Fairy Wings*. People’s sensitivities to the perception of prejudice is tuned pretty darn high at this moment in history.
*If I’ve told you once, I’ve told you a hundred times, Grasshopper…wizard hats OR fairy wings. To combine the two is just gauche.
Probably because in most fantasy, entire planets (especially in the Trek universe) are often comprised of a single ecosystem with a single sentient species with a single culture, geopolitical structure, and who all work in a single occupation with a single industry. ie Ferengi are all sketchy businessmen, Klingons are all warriors, so on and so forth.
Of course hu-mons have a hard enough time getting along with members of it’s own species who look slightly different. Let alone a totally different species that looks like humans with an ass on their head.
Back when I was a 6yo in the mid 1970s I was reading the works of JK Rowling’s predecessor Enid Blyton.
In the mid-80s my teenaged self re-read Blyton’s “Mr Galliano’s Circus” for a laugh. On page three the young boy protagonist of the story met the young girl who’d become one of his best friends and confidants. It was much like Harry Potter meeting Hermione Granger for the first time.
As I recall it, Hermione’s first action wasn’t to introduce Harry to her three performing circus dogs: “Ni**er, Darky, and Boy”.
So, even if the works of JK Rowling are somehow deemed racist, there was a lot of progress in the intervening decades.
“Mundane” was used in fanspeak to label someone not interested in science-fiction long before Piers Anthony was on the scene. I’m sure the SCAdians picked it up from the fans, since there is a fair amount of overlap between the two groups. I don’t think it was meant as a pejorative so much as using one characteristic to label a whole person.
In Babylon 5 the term was used by telepaths to describe non-telepaths. The character Bester (named after Alfred Bester) clearly meant the term as an insult.
There is a tendency for the usage of words to morph over time. What starts as a purely neutral descriptive term comes to take on negative connotations through misuse by people who have negative attitudes about that characteristic.
Consider negro, and even nigger. Consider retarded and moron. Consider handicapped. For Brits, perhaps consider Paki.
It is a characteristic of human speech that those we view negatively we impugn their whole class with whatever term describes that class, and that term takes on negative connotations because of the constant use of that term in negative contexts.
In the Potterverse, muggle is not intended to convey any negative connotations. It is just a descriptor of the alternates, the non-wizards. However, many wizards do have a superior attitude, and that can roll down on how they inflect their use of the word. Thus the term can, in some uses, carry a negative sentiment that is not inherent to the word or in all uses of the word.