Just wanted to say thank you for the many opinions. That's what I wanted, more perspectives. I'm aware my understanding is limited within this arena of experience. I appreciate your feedback.
To clarify, both kids were teens (13/14). The boy called my kid the name because they didn't like something my kid did.
I had actually been dating this guy for 3 months, and we had been friends beforehand. I hadn't directly told his son about my husband, so y'all are right that this means my now-ex had discussed it with his kid. Thanks for helping me realize this. It feels icky that he felt he had to tell his kid about my kid's racial heritage in advance or something. And *still* chose not to confront the poor behavior when the kid said that.
It was mostly about how the kid said it. It was like the word secretly meant disgusting and immoral.
Yes the white protestant comment was a reference to the WASP term. If someone knows my kiddo's heritage, they might say/think "Oh, that's why their hair/skin/nose is X-characteristic!" But if you don't know the heritage, they just look like one more WASP.
It felt like she would always be *race* first, fellow kid second to that boy.
I'm going to stick with my original instincts. I thank y'all for the support.
(Edited to add my kiddo and I talked about it further. That boy also bragged to her about having a German WW2 nazi officer uniform. I am even more convinced.)