I don't see Hillbilly as being a racial slur at all. It doesn't have anything to do with race. It's more of a cultural thing. If you live in the South Eastern "hills" of the United States in a community of naturalist, city-shunning people- then I'm pretty sure you've embraced being a Hillbilly. It's a culture of music, stories, and hardwork that doesn't necesarilly carry any negative connotations.
I suppose you couldn't say the same for Baldnobbers, but I grew up in the Ozarks and never gave the term 'Hillbilly' a second thought until I moved to California and had some people looking a bit shocked when I said it. But I said it kindly. I've always enjoyed Branson with it's Call of the Hills, Silver Dollar City, and whatnot. I suppose it's all about the intent behind why you're saying it that could make the difference.
Off topic: Being overly PC is just annoying to me. I'm white, but I'm okay with White men Can't Jump...dance, etc. Because, it's sometimes true and funny.
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