it wasn't offensive to mentally handicap people. what the problem was is that kids would use it to make fun of them. derp was commonly used when someone did something stupid or without thinking. what happened is parents complained to mlp because of her name was associated with the word. and sadly, the parents over reacted, and pretty much forced hasbro to remove her from the show. or make her change the name. although, in all things BUT the show, her name is still derpy. and if youre atrue lp fan, she will always remain derpy, no matter what she is called.
It only became offensive after the whole "derp" meme thing got popular. It's gotten to the point where many people associate the word "derp" with mentally handicapped people, usually in a way that's making fun of them.