I don't think that the purpose of the episode was to suggest that it's okay to go around calling everyone "fags." I think the purpose was to suggest how silly it is that we get all worked up over words that evolve and take on new meanings all the time. To the average American boy, "fag" has become synonymous with the word lame. I think the point is that people who lash out at children for using the word gay or fag to describe something that is lame or uncool are just as wrong as those who use the word in a hateful manner.
Language is fickle and changes all the time. Words hold no power; only the intentions behind them are important. I think that a rational discussion about the use of the word is more appropriate than the banning of speech.
This isn't a new concept for South Park. They did an episode where the word "nigger" was uttered by Randy on Wheel of Fortune, and became a new slur against those perceived as bigots. Other episodes have touched on this idea as well.
I would discourage the widespread use of the word "fag" because it leads to a negative climate for homosexuals, whether that is the intent or not; however, I agree with the general message that we shouldn't let words have so much control over us. I think Matt and Trey would agree with that too...