In Michigan we have universities that are both sides of the fence. Eastern Michigan used the name Hurons but in 1991 changed to Eagles. Central Michigan is still called the Chippewas with the permission from the local tribe.
Once enough people decide something is offensive, you either change it or suffer the consequences. The thing I find most interesting is the campaign it took to slowly drag enough people to that conclusion.
Certain groups have been working on this since 1940s. I remember seeing advertisements in Sports Illustrated from the 1970s that had pennants with alternative racist-slur nicknames for the non-native races. Kind of disappointed I couldn't find a picture of it online. As recently as 2002, the same magazine ran a story that said over half of Native Americans did not consider the nicknames offensive. It was sort of suggested that the activists weren't necessarily on the same page with the population at large.
It's also sort of fun to look back at all the different sports teams and colleges that have changed their name and/or logo. Stanford was one of the first, but there have been a number of others that I wasn't aware of.
A group of people incorrectly called an incorrect term for hundreds of years is likely derogatory. to most reasonable people. Not quite the same level but here is another analogy: you work with people at an office and your name is Bob. Your co-workers know your name is Bob, but they only call you Bill. That's demeaning and disrespectful, unless you have consented.
Functionality and common knowledge or usage do not negate the derogatory aspect of words. Black people were called a certain word, it may be construed by some as functional, and everyone knows what it means; but, that does not mean it is acceptable nor does the functionality of the word negate the improperness of the word. The same logic applies here. Please note: I am not going to engage a debate as to the hierarchy of "Indian" and the other, but merely address the underlying reasoning.