"feeble-minded", maybe? It's derogatory and yet a bit more gentle a term than "retard", definitely something a lot of people would use and consider to be a considerate euphemism even a couple of decades ago, I think.
As I recall, 'mentally retarded' was a considerate euphemism, but 'retard' (with the emphasis on 're') was an insult made up by children.
My own opinion is that no word can be invented that won't be misused by someone. When AIDs was new, I remember Cub Scouts running around touching one other and yelling, "You've got AIDs!"
What seems to work better is for a group to take a word and make it their own, as with Black is Beautiful, Black Power, and Gay Pride. (And Deaf, to some extent, though I don't like the direction it's gone in any more than you do, Chase.)
As for mental retardation, here's someone
http://abcnews.go.com/Health/rosas-law-asks-senate-kill-slur-mentally-retarded/story?id=9109319
who wants a retarded person to be called, an "individual with an intellectual disability."
"Intellectually disabled," might work. Or you can work around it. "James was in a special class at school." "Marcia had gone to school for six years as a child, but all she seemed to have learned was to recite her name and phone number."