what's the status of the other "n word," anyway?

More and more recently I'm running across the word Negro in literary and popular fiction--and maybe even here and there in a magazine. Now, I know that the N word is totally out of bounds, except to hip hop artists. But I was under the impression that Negro was sort of N-lite (well, maybe zero calorie N). And now here it is back again. What's the deal? Is Negro a racist term or not, or is it just like saying Formosa instead of Taiwan or Burma instead of Myanmar?