There is nothing offensive about the word "farang" and perhaps since I interact with all levels and backgrounds of Thais on a regular basis for work I use it in a similar fashion. Only someone either ignorant of Thai custom/language would think otherwise.
To anyone interested I found a sensible explanation for the use of the term farang that anyone living in Thailand for a reasonable period will probably agree with;
" So really, believe me, the word 'farang' is not in itself insulting. My own wife uses it about me as a matter of course and I would be rather surprised if she meant it in a bad way.
That is not to say that 'farang' is actually a polite word. It may not be an insulting word but it is what we might consider to be casual or common language. It is a little like calling someone a Brit rather than British, an Aussie rather than Australian or a Yank rather than American. They are not actually insulting monikers in themselves but they are casual terms that encourage the feel that they may be used in either an affectionate or derogatory manner.
I think this is what has really cultivated the myth that farang is an insulting word. It is not that it is an insulting word but more that it is lower class language."
Source and text in full: http://www.knowphuket.com/thai_langu...her-people.htm
To conclude I agree with that author, there are some small minded ignorant angry people who are determined to "be insulted " whenever possible and then "come out swinging" to the supposed source of the insult.
My understanding is farang is a slight corruption of the Thai word for French / France which were one of the earliest western explorers to came to Thailand, and that it is just a word that describes any kind of foreigner, I personally don't have an issue with it ( other than being described as French). Thailand is very different in attitudes to the UK so expecting not to be refered to in a perceived derogatory way isn't going to happen, it always amuses me when they charge foreigners more to enter places, I like to imagine that happening in the UK and the meltdown that would happen if it did.