This is a quick story that my dad's blog （http://oldmath.blogspot.com/） reminded me to tell this story, even though it happened about a month ago. It was actually somewhat important in getting me into learning Chinese more aggressively.
A long time ago I got a friend to tell me the worst thing you could call a foreigner. The goal was for me and my friend to call each other that word. There are some good words like Yangguizi, but that is more popular in China (it means foreign devil). However, we found one that sounds like See Ah Dough Ah. Ah Dough Ah means foreigner, and See means dead.
The term is great, you say it around a Taiwanese person and there is blushing and freaking out all around. I quickly came to have the same social inhabitions about it that I would about any similar word in English, if for no other reason than the word's effect.
Well I was playing basketball, and me and a guy got in the way of each other. At the time I spoke even less Chinese, so the kid figured he could say something in Taiwanese (most cursing is done in Taiwanese here) and I would not understand. So we get in the way of each other for a rebound. When he comes down he said "See Ah Dough Ah" nice and clearly.
The whole court froze a little bit, I am not sure if they would give him props if I did not understand or if they would have said that was not cool. But I made it, real, real clear that I understand. I got up in his face, and wishing I spoke Chinese, I said in English, "What? What did you say?" It scared the shit out of him that I understood. I basically cursed at him in English, told him to watch his mouth and lets finish the game. I finished the game at 1000x speed (I made a move at one point that I have tried to recreate ever since, I damn near accidently dunked it).
Eventually the older guy made sure he apologized (okay, the kid wanted to apologize, Crazy father just made sure I did not kill the kid I think). I am cool with them all now, and they at least speak some Chinese to me, now that I can say something. However, I now play at a more serious court, so I don't see them as much.
I wish he had done that now though, because now I can say all the things I wanted to say in Chinese. Now that is progress! :)