To refer to characters by their ancestral national names raises the following issues:
1) It is illogical. An insult must have emotional appeal to the intended target. One may reasonably expect to cause offence by calling a British citizen a 'stupid Brit', 'whingeing Pommy' and so on.
But calling him a 'Stupid Anglo-Saxon' is not likely to have the same impact. If it doesnt have impact it wouldnt get used.
2) There is a second, more disturbing trend here.
To start dropping the use of 'future' names such as Bretonia and Kusari - in favour of current names like 'Jap' and 'Brit' is to push the edges of acceptable conduct.
Using current insults gives them immediacy to the PLAYER - not the CHARACTER. This is why we dont allow current swear words to be typed in chat - though an archaic or made up words like, 'what the frel was that?' or 'Thou art naught but a bulls pizzle!' you could reasonably expect to get away with.