I personally think that in the context of an educational discussion, it was ok to use the slur. I also think it is acceptable that the consequence for a student filming it and publicising it on the internet, is suspension, given the number of idiots out there who could be incited to violence by a brief clip. If students want to risk violence and a suspension by filming, that's their call.
The idea that a word should not even be uttered is bonkers to me. Whether "nigger" or "paki" or "spic" etc are used in a educational discussion doesn't suddenly make the Atlantic slave trade / brutally exploiting people through slavery and colonisation ok. And if the words are used to highlight that these words are intended to demean and "other" people when they were used, which was part of the process of making it morally acceptable to dehumanise and mistreat them, then I think in the context of that discussion it should be ok to use them. Maybe students just need to learn to be more resilient and cope, and that's the message that should be reinforced by schools.